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?

62 Responses to “April Mortgage update: And more musings on where to put extra money”

  1. plantingourpennies Says:

    Are DH’s 401K options really so bad that it’s not worth maxing out for the immediate tax savings since you’re otherwise accumulating lots of excess at the moment? I presume you guys are in a fairly high tax bracket if you’d need to back-door a Roth….

    • nicoleandmaggie Says:

      Yes. We’re contributing the match, but no more. It is very high fee. But I really do think it is time to put off deferred maintenance and to buy some of the things we’ve been putting off buying because of uncertain income. And by myself I am contributing more than 20% of our income to retirement.

      Also we just barely hit the IRA cap and only because of 3 months of summer money because I got grants because we needed money (and I got lucky).

      This largesse isn’t so much from accumulating as it is from not spending down. Most this excess is that we needed a larger emergency fund and full summer money when DH wasn’t employed, but then he got re-employed. It isn’t like we have 58k from his new job just sitting there. This is mostly the money we saved up in anticipation of his quitting his previous job and starting his own business.

      • Debbie M Says:

        If he knows ahead of time when he’s going to leave, he can always try to contribute the max for that year because of course you’re going to roll it over into something good after that. Maybe even if you only suspect he’ll be laid off–then if you’re wrong, you still have the nice big income.

  2. Holly@ClubThrifty Says:

    We struggle with the same thing, honestly. If I were you, I would be tempted to pay off the mortgage once and for all. At least you know you can =)

    • nicoleandmaggie Says:

      Well, we can if we’re planning on not having any emergency fund or being able to pay for DC1’s school or for say, daycare. I don’t have the spreadsheet right now, but I think the amount saved from total prepayment was ~5K, which doesn’t really seem like the best use of funds from an optimization perspective. Though honestly, the prospect of having to deal with changing the bank accounts (they’re currently free because of our mortgage with the same bank) is pretty daunting. Maybe this summer when there’s more time we can think about it. If we haven’t spent all the extra money by then!

      • Leah Says:

        Maybe this summer is a time to create a plan for what you do when you pay off your mortgage. If you just paid the minimum, you still have 4.5 years left. Maybe make a 1, 2, and potentially 3 year plan this summer. Your interest is fairly low, you’ve got a stable job, and you have other ways to use the money to your advantage. Plus, the end is in sight. Don’t rush to pay off the mortgage if it will cause you more difficulties, but do prepare this summer to plan for when you’re all done.

      • nicoleandmaggie Says:

        Well, my job is fairly stable, DH’s not necessarily as stable. So long-term plans have to include different kinds of scenarios.

        I’m hoping to go on a sabbatical at some point in the future, so that’ll be a big cut in income and increase in expenditures for a year.

  3. Leah Says:

    I think it’s time to fix the kids’ bathroom. Again, yes, shopping around for a contractor etc takes time. But what a quality of life investment. I’d make some of those deferred fixes around the house. Are there any other things in the house you’ve been aching to fix/do/take care of? If you spend the time to get a person in for the bathroom, it would be worth it to hire that person to honey-do a bunch of stuff.

    One that often gets overlooked (but I think really ups the look of a house) is to switch out all the outlets to white and a nice look. It’s fairly simple to do — I did it with my dad — and really makes a difference. I’d love to do it where we live now, but I’m not sure we have access to a fuse box, and the school discourages us from doing electrical on our own. I’m not a fan of the cream outlets/plates with white trim.

    • nicoleandmaggie Says:

      Yeah, that’s our plan– find a handyperson to put tile in the bathroom floor (in place of carpet, for those who missed that post), and then have hir do a bunch of other stuff. DH would also love it if he didn’t have to seal the deck himself this year. (Though first up he’s looking forward to not mulching. I have become useless with yardwork because of my new-found extreme allergies to all local plant-life.)

      Deep down, I want to remodel the kitchen. I really do. But we’ll see. The other stuff is a bigger priority.

      Our outlets are actually quite lovely and we’ve got about a zillion of them (we know this because every single outlet had to be child-proofed–we went through boxes of outlet covers). Something the previous owners of the house cared about a lot, I guess.

      • Liz Says:

        YES – whatever else you do, get rid of carpet in the bathrooms. ICK!!!

      • nicoleandmaggie Says:

        We will! Well, at least in the kids’ bathroom. The carpet in the guest bathroom is the kind so elderly mothers-in-law don’t slip on the floor and break their collective hips.

      • Leah Says:

        Again, maybe this summer is time to plan/get estimates/prioritize. I’d do the bathroom ASAP, since that’s a big quality of life. Look into costs for the other things and then decide. I hear you on wanting a new kitchen. I’d love that :-) we have a really long galley kitchen with lots of awkward placements (one of these days, I should share photographs). Nice kitchens are so lovely.

      • nicoleandmaggie Says:

        I like galley kitchens a lot, but that’s not the kind we have. We have one that looks beautiful and like it *should* have perfect triangles, but it is all a lie. (We figured, it’ll be easy to put in the gas stove and replace the countertops… but then we tried to live with it for a while and realized the problems were more than skin deep.)

  4. First Gen American Says:

    My random thoughts from my own journey towards mortgage freedom:

    I NEVER EVER regretted making purchases that decreased spending over time. I only ever regretted not doing them sooner and yes, part of it was the entropy factor. I waited 7 years to install a water meter even though it had a 1 year pay back because it took effort to research installers. Those items should probably trump everything else if your pay back time is shorter than the time you plan on staying in your home. Plus, from this and other posts, it sounds like you’re long overdue to do some much needed maintenance on the house. I would also add “major life improvers” on this list (ehem bathroom carpet). Our new home needs everything. Literally everything, so prioritizing is a big part of what we do. We are both time and money constrained on how much we can get done on our current home. We were going to put off buying certain appliances and tried living with them, but the fridge and stove were so bad, they made cooking/eating agony. So, they moved up the list, plus the energy savings made it a no brainer. (The fridge was missing shelving for example. The oven was rusted through and was unusable.) I’m guessing there are some things like that with you. If you love cooking but hate your stove and your stove is over 10 years old…it probably should make it to the short list. Convection ovens are worth the extra cost by the way. My heating/cooling bill went down by about 60% on my first house when we did doors/windows/insulation/appliances. I didn’t regret those purchases. I only wish I could do them faster on my big 2 family because I desperately need my current heating bill improved. It feels un-green not spending on that stuff.

    I was in your situation and opted for the stock/investment route in lieu of house payoff. Then the stock market crashed, I lost a lot and I regretted not having a paid off house. Everything looks all hunky dory when the market is at 16,000. What would happen if stocks dropped 50% again…and by the way, when that happens, other bad things happen to like layoffs recessions, etc. So anyway, I was kicking myself for being so stock heavy.

    I NEVER EVER regretted a “Luxury” purchase that I use all the time. I only ever regret those purchases if I don’t use them. I regret the $80 label maker that’s still in the box or a piece of clothing I don’t wear..hence my hatred of clothes shopping. I don’t regret my ipad or my mountain bike even though it is an expensive one. I had my last one for 14 years and got my money’s worth. Generally well thought out purchases lead to good decisions. If you have blog income, you may be able to write off your smart phone purchase which is why I bought the ipad, because I could write off the expense. For the

    I do recommend being 100% debt free for a while or forever..so I do suggest paying off your home eventually. Not right this second as you do need a buffer for emergencies and your maintenance, but soon. It made me see life through a completely different lens. Yes, it made me feel lost for a while because my easy and obvious use of my money was taken away from me, but it also made me think deeper thoughts. Am I really in the right job? When do I want to retire? What else do I want to try in my life? Am I doing everything I can for my family? (the answer to this ? for me was no for multiple members of the family..hence our decision to move). Also, having $1200/month fewer fixed expenses will make saving so much faster. I didn’t really notice an increase in spending until we bought the 2 family.

    Perhaps you can find a good digital piano on craigslist or ebay? That seems the kind of thing that may have a good used market for. For ephemeral purchases, I try to estimate the cost/use, plus the hassle of maintaining/storing that item. If it’s hard to estimate how much use something will get, then I don’t usually purchase said item. Hence, I don’t have a treadmill but I do have a mountain bike.

    • nicoleandmaggie Says:

      Well, the stove is a top of the line very nice almost brand new when we got it… electric stove. We do have gas hook-ups. But the triangle in the kitchen is bad and the countertops are awful– they’re the kind that stain yellow when you get bleach on them. So yes, we could have replaced the stove right away or replaced the countertops right away, but since the triangle is bad we’d have had to redo everything again after fixing the triangle… so 7+ years we’ve done nothing.

      Spoiler: we bought the piano already and will post about it next week.

      We’re doing both stock investing and mortgage pre-payment. I’m actually pretty happy with our taxable stock decisions (keeping our pre-house money that was in stocks in stocks) because they’ve recovered and grown quite a bit. (Also it is very difficult for me to be fired.)

    • OMDG Says:

      I totally agree with your priorities. I hate shopping for myself because I always feel bad when I don’t wear the new clothes “enough.” Same with buying myself “toys” or taking expensive vacations.

      I think if I had some extra cash lying around I would a) buy new kitchen appliances (our new refrigerator was SUCH a good decision), b) build a back deck, c) replace windows and doors, d) invest in activities for my kid (things she loves, but that are expensive — like gymnastics class, or a piano), e) paying people to do chores I hate (gardening, cleaning), f) buying a new car if the ones you have are getting less reliable and you can make the purchase in cash, g) splurging on a trip to visit the in-laws overseas (without wincing too hard as I drop 5K on airfare).

      I have definitely made financial decisions in order to avoid future expenses.

      • OMDG Says:

        Oh I will say, in our case we are deferring major home renovations because they take FOREVER and I don’t have time to supervise. Our neighbor just redid her kitchen, and while it is beautiful, it a) makes her house the most expensive on the block, and b) took 8 months.

      • nicoleandmaggie Says:

        8 months?!?!?!!!!

        urk…

      • nicoleandmaggie Says:

        … maybe we could just grill a lot…

      • OMDG Says:

        She suggested buying your cabinets first, waiting until they arrived, and THEN doing everything else (demo, remodel). Apparently cabinets almost always take longer than promised to arrive. It still took her freaking forever, but at least it wasn’t the multi-year hell my other friends went through. And yes, she grilled a lot and and became besties with her microwave. Ultimately she gave the contractor keys to her house so her entire life didn’t have to revolve around the comings and goings of the contractor.

      • First Gen American Says:

        My kitchen remodel took almost 2 years….but we were taking down walls and moving doors which led to re-siding much of the north side of the house and we did it ourselves, so things only got done on weekends. You can do it in stages, so you’re only kitchenless for a small period of time. My husband was really good about keeping the appliances and water hooked up ‘somewhere”. Not that I recommend this route, or getting pregnant in the process, but it all worked out fine in the end.

        You need to do a post on “what should I think about with my kitchen remodel.” I have loads of material.

      • nicoleandmaggie Says:

        Hahaha, one of these days. We were probably just going to hire a planner of some kind– we need someone who understands triangles and can help with the fact that I’m short and DH is tall. Of course finding someone may be a hassle.

      • nicoleandmaggie Says:

        If you’d like to guest post (we have no money to pay you though), we’d host such a post! (Or, of course, you could resurrect your blog…)

      • plantingourpennies Says:

        We’re planning on doing our kitchen (and the floors in the main area at the same time) next year… Depending what the structural engineer says on restructuring the ceiling and rafters, we think it could take up to a year to do. Chaos! For a year! But hopefully a beautiful kitchen that I want to keep forever will be worth it. =)

  5. First Gen American Says:

    Just read your thread to leah. In both cases for different reasons, I bought new appliances before I remodeled the kitchen. A good stove/fridge can make a world of difference to the usability of your space.

    • nicoleandmaggie Says:

      We have nice appliances. It’s really the triangle and the countertops. (And the electric stove, but we get used to the stove, and it may be better to have electric while the children are small.)

      • First Gen American Says:

        I had an artificial “work triangle” built into my last kitchen that made the kitchen small and ate up what little counter space we had. Everyone commented on how much bigger our house looked when the fridge wasn’t jutting out into the middle of the floor space at a 45 degree angle. I mainly hated the lack of counter space when you try to jamb all the appliances within arms reach. It makes way more sense to have countertop near your stove and fridge than having all your stuff crammed next to each other. Where do you prep your food or put down groceries when you come home from shopping? What a stupid layout. I have those white staining counters in my current place now that are missing formica in some spots..some sections are clear through to the particle board…nice. Also, the kitchen flooded at one point, so the inside of all the cabinets smell musty despite 3 rounds of bleach. It could be worse I guess..but since the plaster is being held up on some of our walls with duct tape and the hallways are freezing cold, those rooms will trump our kitchen work despite how much we use it.

      • nicoleandmaggie Says:

        ick
        I’d been wondering how things were going with your fixer-upper…
        I feel like a goodluck and Godspeed is merited.

  6. chacha1 Says:

    I was gonna say, when I got my digital piano I got it from UCLA’s annual music department sell-off. At about half retail. :-) But you beat me to it!

    Just wondering, have you and your husband considered putting any of that ‘extra’ money into real estate? Not investment property in the traditional sense (i.e. buying a duplex to rent out) but maybe a dream lot in the area where you really want to live later on?

    What The Man and I have told ourselves is that even if we eventually decide NOT to build a retirement house on our lot, it is certainly going to gain more value than the equivalent amount of money held in a savings account, and we can always sell it again.

    • nicoleandmaggie Says:

      “have you and your husband considered putting any of that ‘extra’ money into real estate”

      NOPE! Where we really want to live = the SF bay area… and it makes no sense for us to buy out there, even if we were living out there. (Plus I don’t think we even have the down-payment for a parking spot out there.)

  7. heybethpdx Says:

    I’m not even remotely in your fiscal shoes, but I did look at my mortgage (29 years to go) and its low low low interest rate (3.5 APR) and decided to put the equivalent of roughly four mortgage payments/year into the stock market (Vanguard VTSAX), instead of into paying down the loan directly. Right now if I stay the 30-year course, I am done in 2043. If I pay 4 payments/year to my lender, I’ll shorten the loan by about 9 years (payoff in 2034), whereas I figure with a pretty conservative return (6%) I’ll be able to fully pay off the house with 14 or so years left (payoff in 2030). Assuming rosy future earnings, I could even get the house paid off in 15 years (2028) which would be really sweet.

    I do have 6 months’ expenses saved, my job is pretty stable and I could get by indefinitely on savings/unemployment, and my house isn’t under water so I could get out if I had to.

    If I were in your shoes I would definitely get a yard person first and foremost (I might sell plasma before I let mine go), and would also look into the home upgrades you’re interested in. Maybe you could do the kitchen when you are away sabbatical-ing.

    I’m saving for an awesome deck, but I think it’ll be a while before that comes to fruition.

  8. Linda Says:

    “How do you decide if you can put money into something that’s going to cost you more later?” Do you mean something like a house or a car? Or a child? ;-) I think often we don’t realize something is going to cost us more later. I’ve been trying to figure out how much I’ve put into my house over the 12 years I’ve lived here (sadly, some of the records of capital improvements were lost in my divorce) and it seems that most of my “equity gains” aren’t really gains at all considering the improvements that have been done. I guess that’s not really costing me more, necessarily, but it does make more plain to me that houses are expensive beasts to take care of and not just equity machines.

    “How do you allocate between investment expenditures, extra-cost expenditures, and ephemeral expenditures?” I try to avoid ephemeral expenditures as much as possible these days, although back when I was a DINK I didn’t think very hard about them. For example, I stopped going to the library and would just buy lots of books every month. Now, I find that if I put off my more ephemeral spending desires long enough I can usually just do without. Another example: I bought an iPad about two years ago before the mini came out. When the mini came out I really wanted to get one because that was the size tablet I ideally would have purchased originally. But I waited because I had a fairly new iPad, and I’m finding that I’m really OK with the full sized one. Other than my house (again, which I’m not really sure is an investment), my investment expenditures are basically all around retirement needs: stocking up the 401(k) (which is now going 100% to my Roth 401(k)), paying the LTC premium, and adding to the variable annuity as the financial adviser recommended. I did make one “crazy” investment last year by investing in a friend’s business. I bought a convertible note which has since converted to stock. I’m not even consciously considering that as “on the books,” though. My hope is that I won’t lose any of my initial investment and may even make a small profit if her exit strategy of selling the company to a big player actually works.

    “Do you think about the future costs of a purchase?” Yes. When I bought a new-to-me car a couple years ago I researched the general maintenance costs. When I bought the house I knew there would be yearly maintenance costs, too.

    BTW, I’m currently researching a move to the South Bay (Silicon Valley) which would be a huge lifestyle change for me. I would switch from homeowner to renter for the foreseeable future, but after 15 years as a homeowner I think I’m OK with that change. What I’m trying hard to reconcile, though, is how/what impact the different cost of living will have on me since this voluntary move would not come with a cost of living adjustment. *gulp* But I’m thinking that the weather, access to fresh food, and outdoor activities all year ’round may make up for that.

    It seems like only one of you (the one with kids) is a homeowner. Is that true? Or are you both homeowners? If the other one is a renter it may be interesting to read a post about why the decision to rent was made.

    • nicoleandmaggie Says:

      #2 is not a homeowner. I’ll let her answer your questions though– maybe we can convince her to do a post.

      Re: something is going to cost more down the road… it’s something people should think really hard about, especially with major expenses. If people don’t realize that houses and children come with increased expenditures, I’m not sure what to say about that…

  9. Miser Mom Says:

    Ever since I read “Economics Explained”, I have a new appreciation for putting money toward “capital” — sort of what you call, “spending that decreases your expenses down the road”. It makes me appreciate the ability to use windfalls and such to do deferred maintenance or even home improvements.

    Like you, I’m sitting on a pile of money in our savings account that I’m trying to put to better use. I’d really love to put it into a “donor advised fund”, but it’s not quite enough money for the required initial investment. And so (again like you) I’m swirling between sabbatical plans, home improvement, school fees, and such. Maybe we’ll both end up throwing our money down the toilet . . . or at least redoing bathrooms.

    • nicoleandmaggie Says:

      Yup, capital is important!

      We’ll need to do something with the master bathroom once the kittens are out– they’ve done a number to the wallpaper and some parts of the cabinets. Fun times!

  10. Laura Vanderkam (@lvanderkam) Says:

    Since you’re already saving a lot, I’d look at any major pain points first, and if money can solve them, do that. Nice vacations are good too — if you like the SF bay area, go there more often!

  11. Leigh Says:

    I’m only doing the Backdoor Roths now because I’m convinced that at some point, I will have traditional IRAs AND still have a high enough income that I can’t do regular Roths. Or that if I do the Backdoor Roths now, I might not later because of compounding.

    I explained how it works to my boyfriend and he decided it wasn’t worth doing, but maybe he would re-evalute for next year.

    Your P is inching up to $1,000/month :) I like round numbers.

    I never use extra income for spending since my base pay (low $100k range) is more than enough to max out the 401(k) and Roth IRA, cover all of my spending, and allow for some after-tax savings. I’ve actually been debating using part of my next bonus to give/lend money to my sibling. I’m pretty torn on whether or not to even offer (or if he/she would even accept), but part of me wants to. It would make me really happy for hir to be able to take this program, but (s)he can’t afford to do it without borrowing money from somewhere.

    I would really like to figure out why my electricity bill is so high and why my place is always so cold, but I doubt it would actually decrease the electricity bill, so I’ve been putting that off.

    • nicoleandmaggie Says:

      What kind of program? (Some programs you shouldn’t go to at all if you’re not getting full funding.)

      In terms of give vs. lend, we suggest giving.

      Round numbers are awesome.

      • Leigh Says:

        It isn’t a program that would have funding, as it isn’t a university. It is more like a professional, non-degree program. But it would give hir the skills necessary to get jobs (s)he can’t get right now with hir actual degree. It is a reasonably small amount to me (about one month’s total savings), but huge to hir. (S)he didn’t ask me for money, but was just talking about the decision and I kind of want to help. I think you’re right that it should be a gift, not a loan. I’m just not sure I want to give the whole amount. Maybe I could give enough to be helpful and (s)he could then acquire the rest by other means. I feel like hir being able to do this would make me happier than one month’s savings.

    • chacha1 Says:

      high power bills and cold anyway = almost certainly inadequate insulation and maybe bad wiring.

  12. J Liedl Says:

    Currently we’re sitting on more in our savings than we’ve ever seen, but Eldest is just wrapping up her first year at university. She didn’t opt for the tuition-free degree at my institution, so we’re going to need to pull on all of our educational savings and then some to ensure she can do the undergrad debt-free. I’m sitting with most of that excess money in regular savings along with GICs that mature in the summer. There’s only a small amount in a tax-free savings account (that would be more if my citizenship status didn’t make that a big red flag for US filings – I need to get my partner to open his own TFSA under which he can save without US tax implications).

    I calculated what I thought we’d need at worst-case scenario (no scholarship, full tuition for five years if she switches majors and needs to do more courses, eight months of residence each year, increasing at 7% a year, minimal summer job income on her part, one summer without earnings if she does a placement, fieldwork or internship). Stared at the number. Stared at her education fund balance report. Wept. We’d been saving since she wasn’t even a year-old but the costs just keep skyrocketing so the savings appeared grossly inadequate.

    At least by preparing for worst-case scenario, I’ve been inspired to sock away money at an accelerating rate. We’re not paying down extra on the mortgage at present and our hopes of renovating the kitchen are on hold until 2018 or so, but we can still tackle less-expensive but vital home renovation projects, such as replacing windows and light fixtures piece-meal. These will save us money on utilities while maintaining the house well, so I figure they’re better uses of our money than saving obsessively for the kitchen remodel while the other priorities sit neglected. Although the 1980s kitchen with its textured cabinet doors will not be missed by anyone when we can do that reno, let me tell you!

    • nicoleandmaggie Says:

      Obviously, we agree about those priorities. Especially given how painful kitchen remodeling sounds based on previous comments. We also may wait to remodel until after the eldest graduates college, just based on fear!

      My in-laws keep saying we should replace the windows with double-pane energy efficient ones and they’re probably right. One of our big plans when DH was un/self-employed was to do an energy audit on the house, but like most of our big plans, it didn’t happen.

      • Leigh Says:

        If you do an energy audit on the house, please write a post about it! My county only gives free ones for SFHs, not condos. I know my primary problem is heating though, so it’s just a matter of finding the time to improve that… maybe this summer.

  13. Eli Rabett Says:

    Think about buying rental property in your town (not someplace far away that you have to pay someone to take care of)

  14. Comradde PhysioProffe Says:

    Having a smaller required bill makes life easier down the road if inflation erodes your earning power or you suffer a job loss.

    This makes no sense. If inflation increases, it devalues debt. You’re better off waiting to pay debt with less valuable dollars later, than paying it now with more valuable dollars.

  15. Debbie M Says:

    “How do you allocate between investment expenditures, extra-cost expenditures, and ephemeral expenditures?”

    It all depends. When I first started working, I decided to pay off student loans, get health and dental insurance, and start making charitable contributions. After student debt was paid off, I started saving for a car and then a house. With raises, I started putting some money into my 403b. When the Roth IRA was invented, I switched to that and tried to max it out every year.

    This year, I’ve gotten a job that will last me until I qualify for a pension. The pay is mediocre and it’s only 30 hours per week, but after a couple of years of living on odd jobs, I’ve gotten my basic expenses down a bit from when I used to have a decent income. I just got my first full paycheck and I’ve learned that my $1540 in take-home pay is $52 more per month than my bare-bones budget. I guess it’s going into savings–it’s not enough to max out my IRA, but I’ll probably add it to my other savings to do so.

    But next year when I get my pension, I’ll have a lot more to play with. Some will go toward renovation savings. (Why yes, the kitchen. Also, I’d like covered parking. And a separate laundry room instead of just a washer in the kitchen.)

    But I’m also making a list of extra-cost expenditures that I will allow myself to jump into. More organic food. Fresh-squeezed orange juice instead of reconstituted (when available at the local grocer–yum). More durable clothes instead of just what I find at thrift stores. For example, I’ll see if Land’s End shirts, which look nice and long, actually fit me. I’m thinking about re-joining the gym (I like the Body Flow classes which are supposedly a combination of tai chi, yoga, and pilates). And I’m thinking of going to more plays and participating in more Austin Steam Train Murder Mysteries ($80/person).

    “Do you think about the future costs of a purchase?”

    I try to–it’s often hard. But this time we were both determined to buy an expensive well-built printer with reasonable printer cartridge replacement design and costs.

    When I bought a car, I asked my insurance company to compare the brands I’d been thinking of–they all cost the same to insure. And they also assured me that the color of the car doesn’t matter (at least on my practical, boring choices).

    I also try to think about future non-monetary costs. Common thoughts during the decision process include “I’m not dusting that” and “I’m not cleaning that.”

  16. Why I rent instead of buying | Grumpy rumblings of the (formerly!) untenured Says:

    […] wanted a post on why I rent instead of buy, so here it is!  (Because Grumpy Rumblings aims to please!  Also, we […]


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