April Mortgage update: And more musings on where to put extra money

Last month (March):
Balance: $61,508.58
Years left:4.75
P =$962.48, I =$251.92, Escrow = 613.58

This month (April):
Balance: $58,365.65
Years left:4.5
P =$970.93, I =$243.47, Escrow = 613.58

One month’s prepayment savings: $8.60

So we still haven’t really adjusted to DH going from 0 salary to 2 times his previous salary (this is a great problem to have).  I’m (mostly) not letting those $200/week grocery bills get to me (though to be honest, grocery spending was still down at the beginning of March– oddly, spending money on cheap stuff last month meant our pantry was stuffed by the time the challenge finished… and we’ve got prepared leftover soups in the freezer and plenty more lentils), but as was noted last month, I still feel a twinge of guilt for a $73 restaurant bill.

On top of that, now that DH has an industry job instead of a state government job, his ability to save for retirement in a tax-advantaged fashion has been dramatically reduced.  He no longer has access to a 457, and his 401(k) access is only worth contributing to up to the employer match (and the match is only 50% instead of 100%).  Still, with my 457 and 403(b) and mandatory retirement, we’re socking quite a bit away.  And the 529 plans are growing at a nice clip.

What these two factors together mean is that our savings account is starting to accumulate.  Before DH got his job, we had to have a big emergency fund for emergencies and we had to have enough money to cover the unpaid summer.  We didn’t spend that lump down before DH’s new revenue source started coming in.  In fact, there is now enough in savings to almost exactly cover the mortgage.  Now, if we paid off the mortgage, there would be no emergency money left or extra summer money and we wouldn’t be able to pay DC1’s tuition for next year, so obviously we’re not going to do that (plus, what would we post on the first of every month if the mortgage suddenly disappeared?).

But, that is a ridiculous amount of money to have just sitting in savings.  In fact, if DH lost his job tomorrow (which we hope he doesn’t!) we’d still have more money than we needed to get us through the unpaid summer + tuition + emergency fund.  (Though I’d have to go back to being mindful about expenditures again.)

I have opted not to put 11K away in the IRA this year.  We’d have to do a back-door Roth and even though it wouldn’t cost extra for us to convert it (we only have ~$33.00 in our traditional IRAs because something spit out a cash dividend into the traditional account instead of DRIPping into the new Roths during the conversion process and I didn’t bother to ask them to fix it).  It is true that we could draw contributions out of the Roth whenever, so maybe I should reconsider (in the remaining 15 days), I dunno.

DH is leaning towards putting more into the mortgage.  I’m not ready to commit yet to putting 10s of Ks in there, but I did up the pre-payment this month another 1K.  We’ll see what happens going forward.

I think we should make some of those expenditures we’ve been putting off.  We’re going to replace the a/c for $5K [update:  3.5K], and buy DC1 a digital piano for something under $1.5K.  But calling the a/c people takes time and effort, and shopping even more so.  DH wants to get a yard person to take care of mowing and mulching and weeding and bush trimming.  I agree.  Also I really want to take a sabbatical, something that will cut into my pay and increase our expenses because I’ll want to sabbatical in a different state.

Of course, DH might not keep this job forever.   It’s not an enormous company and it may someday go out of business or be bought and changed or they may give up on the telecommuting aspect.  That means we may not have his big income forever.  I haven’t been getting even cost of living raises every year that I’ve been here, and although the current administration seems committed to trying to get my salary up to that of our assistant professor hires, that doesn’t mean that future administrators will feel the same way.  We’ve tried living on just my income with the two kids and it kind of sucks.  It’ll suck more when my income is worth even less.  Tenure is nice, but it doesn’t guarantee even keeping the same real income over time, much less increasing income over time.

When thinking about what to do with extra income, it is important to think about the long term consequences of those decisions.  Some decisions are really obvious.  Putting money towards debt is going to make life much better off later even if something terrible happens.  Having a smaller required bill makes life easier down the road if inflation erodes your earning power or you suffer a job loss.

Similarly, putting money into investments, while more risky, also has the potential to ease things down the road.  Either you won’t have to save as much for your retirement, or you may even be able to turn those investments into an income stream, such as with dividends.

Spending money can go three ways.

There’s spending that decreases your expenses down the road. We’re hoping that replacing the a/c will decrease our needs for a/c repairs, and lower our monthly energy costs in the long term.

There’s spending that increases it.  Switching to smart phones (something we haven’t done yet) would potentially increase our spending over time, unless we found Ting or a similar company to be a good match for us.  It would be difficult to go back to flip phone plans after getting used to having a smart phone.  Our colleagues, faced with similar situations post-tenure, have opted to buy new houses and fancier cars– when these are financed, they can trap you into needing your higher income (and higher insurance and/or tax expenses even if not financed).  Some of our colleagues who have done this complain about not being able to afford to pay college tuition for their kids, or say that their kids have to go to state schools.  Different priorities.

There’s also one-time spending that isn’t going to make much of a difference (except, of course, through lost opportunity costs).  For example, one-time spending on things like vacations or the piano is unlikely to either increase or decrease our future expenses.  They just happen.  And you can always stop paying for housecleaning or yard-work if times get tough.

A goal then for the risk averse is to turn the kinds of expenditures that will be liabilities if your income drops into the kinds where your future expenditures aren’t increased.  Paying in-full helps reduce future monthly drag, but it doesn’t work completely because there’s usually still higher operating costs –you might have to buy more expensive insurance or your property taxes might increase.  That’s where that first kind of money placement comes in–putting as much as feasible into debt pay-down and investments can make those lifestyle inflation increases less risky because it offers a cushion in case of a job loss or other emergency.

So you can’t do too much of the liability increasing spending without a bunch of the liability decreasing kind to off-set.  If you’re going to do some of column B, you really ought to do some of column A too.  And if there’s money leftover, maybe some column C.

How do you decide if you can put money into something that’s going to cost you more later?  How do you allocate between investment expenditures, extra-cost expenditures, and ephemeral expenditures?  Do you think about the future costs of a purchase?

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Link Love

Very confused dogs

Infertility explained by cats.

True story.

Dynamo

Cheese and responsibility is completely and totally right about the Lizzie Bennet diaries.  I normally hate Pride and Prejudice re-dos, but this one is even better than Clueless (was for Emma).  They do a great job updating it to the 21st century and fleshing out characters and these web shows all have such diverse casts because there are a lot of extremely talented minority actors who don’t get jobs that go to blond white people who aren’t as good on tv (we blame the patriarchy).  The three main characters are still white, but they’re also really great actresses.  (This link is probably why we have so little link love up this week.  Well, that and meetings.) (and spring break)(and work drama)

I went to find more links, but the internet FAILS me!  FAIL!!!  I rode a horse, though?  [Wandering-scientist has more hard-core links today over at her place.]

An oldie but a goodie:  signs made funnier

how to put a toddler to bed in 100 easy steps

these are so beautiful! And occasionally a little creepy.  But mostly lovely.

Ask the grumpies: Financial advice starting out?

Norwegian Forest Cat asks:

I’m a late-stage Ph.D. student, and as a result of a lack of funds I haven’t been saving/investing at all beyond a small cushion in a plain old savings account during my early adulthood. I am about to hit the job market though, and I really want to get myself on track financially in the near future so I have my ducks in a row when I need to find health insurance, pay off loans, start investing/saving for retirement, prepare for the eventual death of my car, etc. My SO is a finance nut (as a hobby, not a job), so he has his own suggestions (which are USAA and Vanguard-heavy based on his own experience), but I think a visit to a financial planner would be a really wise one, especially when I have some indication of how said future job will compensate me. But, there are a million certified financial planners out there–how do you get started? And do I need to meet with one in the first place? I’m pretty overwhelmed with options and acronyms but am eager to learn and be involved with it, so just handing over the money to my SO or some bank is not going to cut it. :)

This is a great set of thoughts.  So… like we said in the last Ask the Grumpies, there are a lot of really bad financial planners out there whose incentives are aligned with separating you from  your money, not helping you to make more money.  The buzz words that your SO is throwing out are the right ones (does he also say things like, “low cost index funds” etc.?).  You definitely don’t want to just hand your money over to your SO, but it sounds like ze is making good decisions and would be a handy person around to help you take control of your own finances.

For you I’m going to recommend J.D. Roth’s book, Your Money: The Missing Manual.  He does a good job talking about the basics in a way that allows someone intelligent like you to understand what the different options are and what the pros and cons of these options are.   You can start talking about the things you read about with your SO, which will also help lead you to greater intimacy.  It is really good to be on the same page financially if you ever decide you want to combine finances or lives in a more permanent fashion.

I don’t think you need to meet with a financial planner, but if you do think you do, as with the last Ask the Grumpies post, I’m going to recommend Walter Updegrave’s suggestions on how to go about finding a good one.

If you find YMtMM helpful, then you can find some more personal finance book recommendation from this link here.  The post is about debt advice, but most of the books cover other things too.  In addition to the books in that link, you may find the Bogleheads Guide to Investing to be helpful for getting started with your investing.

What recommendations does the Grumpy Nation have for Norwegian Forest Cat?

Why are academic jobs seen as the holy grail or only grail in fields with the worst job markets?

In case you haven’t noticed, we’re going to be doing a series of posts on academic job market dysfunction and the market for PhDs outside of academia.

In this comment, Miriam writes:

I think it is shameful that many Anthropology programs (including mine) don’t encourage and support non-academic careers. There are both public sector applications and, for those of us who got burned out on low wages in grad school, highly paid corporate anthropology work. User experience research is cultural anthropology. When I compare my experience to my Computer Science husband’s, it’s ridiculous. In my department, I almost had a professor withdraw from my committee when I let slip that I was considering a public-sector Anthropology career instead of an academic one. In my husband’s, the department used the amount of graduates placed with companies like Google as a selling point. More than that, the department actively built corporate links to help with placement.

Given the job market in Anthropology, it is cruel to pressure candidates to value and look for academic careers. Yes, one person from a grad cohort occasionally ended up in a tenure-track job. The overwhelming majority ended up with post-docs or one-year lectureships leading to more lectureships or adjunct positions. I will never understand why professors would expect intelligent people to look at the amount of tenure-track jobs available and not figure out that the odds are heavily against us. I also don’t really understand the bias against public-sector or corporate research. Yes, the research is more constrained, but it’s also more practical. Perhaps one sign that I was always a bad fit for my particular program is that I valued the idea of doing ethnographic research in service of a specific application more than doing it to publish an article or book that would probably only be read by other academic anthropologists.

I’ve noticed this as well.  Humanities PhDs seem to be less encouraging of outside careers than are STEM PhDs.

I do wonder if it’s that there are more obvious career options outside of academia for engineers (for example, my DH is working on something very similar to his PhD work for a start-up, large scale work he couldn’t do as a TT professor because he didn’t have the funding) and economists (government, consulting etc.) and all those other disciplines that have pretty decent academic markets.  It’s true that in my grad program, our advisers were disappointed when top students chose government positions over great R1s, but for the rest of us they were happy to write non-academic job letters for government and consulting work and they provided panels of graduates to talk about what life is like in those kinds of careers.  At my current university, academic jobs (in the US) for our graduates are rare and we funnel most of our students into private-sector jobs.

But Miriam notes that there really are positions for anthropologists outside of the academic sector.  Her professors just wouldn’t hear of them.

This musing is coming on the tail end of checking out the tweets that sent people to our deliberately controversial post on the topic.  Apparently we’re neo-cons because neo-cons are the only people who ever use the word, “entitled.”  (Note:  that means a good portion of professors who teach undergrads must be neo-cons!) We’re fairly sure those folks just looked at the title of the post and didn’t actually read the post itself, since the post itself doesn’t actually say much or take a position of any kind, and the comments decry the defunding of academia.  (Duh!)

But the truth is, even if we fully funded academia, there still wouldn’t be enough jobs for a lot of humanities folks because the more attractive we make those jobs, the more people will want humanities PhDs, because the humanities PhD is essentially a fun thing to do.  We know this because even now there are people willing to starve themselves for the chance of someday becoming humanities professors.  If you make it more attractive to be a humanities prof, all that you’re going to do is drive up supply.

Underlying these complaints, we think, is that many of these people who complain about the fact that we don’t just make tenure-track jobs for everyone with a PhD is that these folks think that PhDs can’t possibly work outside academia like the rest of the hoi poloi.  They shouldn’t have to, what with their lily white hands and all.  That’s where the entitlement actually comes in.  There’s this belief that there’s something wrong, something dreadfully wrong, with leaving the ivory tower.  That’s what Miriam, above, is tapping into.

And yes, that’s easy for us to say, being tenured at all… but…

But… maybe tenure isn’t all that.

Maybe, sometimes, it’s worth grabbing that golden ring and throwing it away.

One of us lives with someone who made the jump (though before tenure), and he’s so much happier.

Academia is still just a job, and a lot of time there are better ones out there.  Nobody should have to put up with crap because of a job, especially people with enough education to escape.

So yeah, it would be lovely if, as a society, we took money from Exxon (and you know they’d take it from children’s mouths before they cut corporate welfare) and funded education again, but that won’t solve the problem of the humanities labor market, because the more attractive you make those positions, the more people will want to have them.  There will be more jobs, but there will be even more applicants for those same jobs.  Heck, even if we cut off all production of new PhDs, folks with humanities PhDs who had given up would return to academia if there were a demand for their services.

Cloud and Miriam were right when they said that learning how to do independent research is a valuable skill, even outside of academia.  Maybe we should stop pretending that there’s something dirty about using these skills outside of the ivory tower.  Maybe we should try to find value in producing things, like Miriam said, that are read by more than just other academic anthropologists.

And who cares what your out-of-touch adviser thinks.

Sometimes you have to get the wrong answer first to get the right one

A good way to start a hard math problem is by playing around with it.  Poking at it.  Trying things to see what does and doesn’t work and to figure out why that is.

For a certain type of math problems, it’s helpful to just guess and then analyze why that guess isn’t right.

I don’t know if you’ve ever played the game Mastermind, but Mastermind is exactly this idea.  One player hides 4 pin colors, and the second player has to guess what the colors are and where they’re placed.  Each turn player two is given information on how much ze got wrong and how wrong it was.  The only way to start is with a completely blind guess.  If you guess right on the first try, the game isn’t very much fun.  That means you won by luck and not by being able to actually play the game.

DC1 had never heard of such a thing before we got the Hard Math book.  Ze was completely and totally frustrated by the first challenge problem (What is the largest possible answer to 782 + ABC =? [with carrying 1s above and above/left of the 7]?) because ze thought ze should just be able to do a math problem.  Even hard math problems were hard because ze was prone to make mistakes, and all one had to do was not make mistakes.  This idea that you have to learn about the problem first and maybe try a few things out was completely foreign to hir.

Life is like that too.  You can plan and plot and analyze situations, but sometimes that takes more time (and provides less information) than just doing and seeing what happens.  Sometimes you get what you want on the first try, but more often, you get clear information on what you need to do better and how and why.

Sometimes you have to fail before succeeding, and it’s the failure(s) itself that is instrumental to your eventual success.

More from the financial education does not work literature

Ironically, you can force people to make “good” financial decisions by allowing them to skip getting financial education if they make the “good” decision instead of the “bad” one!

The Effectiveness of Mandatory Mortgage Counseling: Can One Dissuade Borrowers from Choosing Risky Mortgages?

by

Sumit Agarwal, Gene Amromin, Itzhak Ben-David, Souphala Chomsisengphet, Douglas Evanoff

We explore the effects of mandatory third-party review of mortgage contracts on consumer choice—including the terms and demand for mortgage credit. Our study is based on a legislative pilot carried out by the State of Illinois in a selected set of zip codes in 2006. Mortgage applicants with low FICO scores were required to attend loan reviews by financial counselors. Applicants with high FICO scores had to attend counseling only if they chose “risky mortgages.” We find that low-FICO applicants for whom counselor review was mandatory did not materially change their contract choice. Conversely, applicants who could avoid counseling by choosing less risky mortgages did so. Ironically, the ultimate goals of the legislation (e.g., better loan terms for borrowers) were only achieved among the population that was not counseled. We also find significant adjustments in lender behavior as a result of the counseling program.

Citation here.

Would being forced to take credit counseling cause you to change what kind of loan you took out?  How onerous would the course have to be for you to change your behavior?

Link love

What’s the number #1 reason for increasing college costs? Reduced state funding.

Isis the scientist talks about why sexist bullshit in academia is not ok.

Mutant Supermodel has a new etsy store

Ombailamos on dead pregnant ladies in fiction.

Open culture with sweet child of mine new orleans jazz style.

Scalzi on enjoying problematic things.

The love for this snark.

Pianos turned bookshelves.

A concise history of black-white relations in the USA.

This makes me smile.

Another post we agree with on the Nazereth college rescinding thing.

Github thing.

Too much patriarchy.

If you love Jane Austen

Women who can do math still don’t get hired.

Observations of a changing gender presentation.

This “too much homework” thing is overblown.  Plus the comments are full of people saying, I don’t understand empirical evidence therefore you’re wrong.  They probably needed to do more math homework.

This just in:  Most Americans not putting enough in for retirement.

well… it DOES look pretty fun

miser mom disagrees with ee cummings

this is adorable

THIS IS TRUE.  Also this.