May Mortgage Update: And I might get a month of summer salary(!)

This month (May):
Years left: 1.833333333
P =$1,112.22, I =$102.19, Escrow =$809.48

Last month (April):
Years left: 1.9166666666666666667
P =$1,107.83, I =$106.57, Escrow =$788.73

One month’s prepayment savings: $0

I’m not holding my breath yet, but since I’m too lazy to dig up before/after pictures of our bathroom and the whole fixing the house up for potential renters is seriously depressing me (as is house hunting for a rental), I thought it would be nice to do a little financial planning based on potential new information.

So, last week I was informed that this service thing that I’ve been doing has a little extra money and that little extra money might translate into a month of summer salary.  Count me in for summer salary!

With me going to half pay next year and our housing expenses potentially going way up we’ve cut back on our savings in order to afford housing (and to keep us from having to worry about what happens if nobody rents our house… also all those additional expenses that come with a temporary move).

Here are the assumptions we made when we figured out what we could afford for housing

1.  stop contributing to my retirement next year other than the required 6% plus match (not counting the changes I made to max out the 2015 403(b)), and 2. stop contributing to 529s, 3. get someone to cat-sit for the cost of utilities rather than rent our house, 4. don’t cut back our frivolous spending, and 5.  stop pre-paying the mortgage

So what should we put that one month summer salary towards?  Well, I assume that I will be able to fill the 2016 403(b) in another year when I go back to regular salary, so not that.  I will still have plenty of room in my 457, so that is probably what should come next.  It is tempting to just continue to fund the 529s because they happily auto-deduct every month, but with DH having crappy retirement options, it makes more sense to max out mine to make up for what he’s not contributing (since we’re no longer IRA eligible).  Retirement is more important than college savings, especially given that DC1 has 80K in hir 529 as of this writing.  (DC2 has 20K.)  If we do rent out our house, then finishing out the 457 for the year will be the next priority, followed by restarting 529 savings.  I guess these priorities are the same if we rent out our place or pay less for rent but don’t get that summer salary!

I don’t think we should spend more than 5K/mo for housing.  If we were going to do that, we should have grabbed that perfect furnished 6K/mo house several months ago.  Yes, I know that’s a sunk cost but loss aversion is real, as is that bias you have to make your current actions cause your previous actions to have been the optimal actions.  But in reality, spending 60K/year on housing already makes me feel a little ill– 72K is just completely implausible, especially when we could get an imperfect place for more like 36-42K/year.  I do hope we find a closer to perfect place in our price range.  But we’ll see what happens a little later this summer.

What are your priorities when you get an unexpected temporary income boost?

29 Responses to “May Mortgage Update: And I might get a month of summer salary(!)”

  1. First Gen American Says:

    Perhaps it is my inner city upbringing and knowing I can survive just fine in an “undesirable” part of town, But those rental numbers still scare me. Kudos for being so brave to pursue your passion.

    As much as I love where I live now, I still sometimes get heartburn over the money I am spending on fixing my house. If you like your job I guess it’s easier to say…well these choices defer retirement a few years. In the grand scheme, it’s not the end of the world. (Unless you’ve saved didn’t squat until now).

    • nicoleandmaggie Says:

      We could retire now if we wanted to live a mustashian lifestyle someplace undesirable. I have a really hard time believing you’re not also in that situation. I Don’t think there’s anything brave going on.

      Undesirable in this situation means literally failing schools, like 1/10 stars.

      • Thisbe Says:

        I’m not a parent, but I think I would be tempted in that situation to at least float the discussion that the kids might learn more important and interesting things from a year in a failing school (while still having excellent parents and a great home life) than in a decent school.

        Then again, I spent two years in a school that probably would have been 1/10 if they had rated things then; apparently it’s been cleaned up a lot and isn’t nearly as bad, and I just checked and it’s a 4/10 on the real estate sites. My assumption of earlier “1/10” includes, for grades 6-8: kids with water bottles full of clear spirits in their lockers; sex on the playground at lunchtime; a kid in my algebra class who had fathered at least one child; drug deals in the girls bathroom; and only three competent teachers that I can think of, the rest being comically bad. Also included in this analysis – at least two kids I can think of who, in retrospect, were living in cars with their families.

        I definitely didn’t enjoy it at the time but it also clearly didn’t stunt my potential. What’s that thing called where one values one’s own experiences (even if negative), just because they happened to oneself? And this might be another instances of, “Wait, your parents let WHAT happen to you?” – It’s always a little hard for me to tell, and though I’m quite fond of my parents it has become clear that they didn’t always do the best job, vis a vis me.

      • nicoleandmaggie Says:

        We’re fine with 7/10 and possibly even 5/10, but not 1/10. Given that DC1 will only be 8-9, we’d rather stick with diverse and not dangerous. On top of that, we don’t want to burden a failing school with hir, since gifted kids can be problematic.

      • OMDG Says:

        LOL. Here we get raked over the coals of liberal guilt for not considering our local public school for our daughter, which is…. improving. It’s now… (drumroll please) a 2/10, and was a 1/10 in the not too distant past. They even recently hired a social worker! Woo?

        @Thisbe – A local 4/10 had a case not too long ago where a 5th grader raped a 3rd grader in the bathroom. So…. yeah.

      • nicoleandmaggie Says:

        No guilt here. One can fight for systemic change at the global level while protecting one’s kids at the local level.

      • Thisbe Says:

        Yeah the only reason I think the 4/10 in my personal experience has improved is that I was just living near there for a while and I know people who have their kids in that school now (and, actually, I know people who are teachers there now) and they say that it is like night and day what that school was like in the nineties and what it’s like now.

        But I just realized that the school ratings algorithm is based entirely on standardized test scores. (!!!) Possibly a poor proxy for safety and desirability in a school.

        …I just got sucked into a rabbit hole of which private schools are available in this town, and apparently there is a liberal-arts-based K-12 charter school here. Wow.

      • nicoleandmaggie Says:

        The difference between 7/10 and 10/10 is probably a poor proxy, especially if you can see that the % ESL is high. However, once you get into the truly failing numbers, you start getting only people who don’t care about education or who really cannot afford to move elsewhere and don’t have any resources so you end up with a downward spiral.

  2. taylorqlee Says:

    Wow, those are some expensive rents, like Bay Area or NYC rents. Good luck in finding a spot.

  3. Holly@ClubThrifty Says:

    I hope you get a summer salary! It sounds like you have good options- I would be tempted to put it into retirement. Or you could just use the “extra” money toward getting a rental you really want with no guilt.

  4. Leigh Says:

    I saw a huge income boost in 2013 that I had a strong feeling would not last (and it didn’t). I used it to make a huge dent in my mortgage, paying down about $30k more than “normal” income would allow. I’d already maxed out all of the retirement options available to me though.

    I like the 457 option for your summer salary unless you feel you need any more buffer money to get you through next year?

    • nicoleandmaggie Says:

      Yay income! Are you still liking your new job better than the old one (even without the massive bonuses)?

      • Leigh Says:

        Yes! The commute is a bit of a pain, but my boyfriend has been doing more of the cooking to help with that and I have my weekends back, which is AMAZING! I forgot how wonderful weekends were. And I’m no longer working in the evenings. I need to find a hobby / get back to exercising! I have time to do that!

        No more massive bonuses, but I got a huge jump on base salary, have some guaranteed stock, and WAY better benefits. Like my 401(k) match doubled between the base salary jump and their benefits being better, they’ll reimburse me for fitness stuff, they give me more HSA money, I pay less for medical premiums overall and have slightly better ones, etc. And I way prefer the spacing of employees than how they were at my previous company. All in all, seems like a good decision so far.

    • nicoleandmaggie Says:

      We have 75K in cash savings right now… if we spend more than that on top of our incomes, there’s something wrong with us. Deep down I’m hoping we’ll have enough left in cash to redo the kitchen (on top of maxing out retirement) when we get back, but we’ll see.

      • Leigh Says:

        Heh. Kitchen re-do is exciting! My parents keep putting theirs off. I wish they would do it soon though so they can enjoy it for many years to come.

      • nicoleandmaggie Says:

        If we’d known we were going to wait this long to do a full re-do, we probably would have put in a gas stove and better countertops a long time ago. But it will be nice to get the triangles etc. fixed at the same time!

  5. rented life Says:

    This is us right now. Someone at one of my 2 (pt) jobs called me a week and a half ago and said “I’ve got FT work for you through June 15. Do you want it?” Um yes. Because while that means working one full time and one part time job to an insane amount of hours (60, while taking care of LO), it also has an end date so I can remember that when I feel overwhelmed.

    Anyway, we’ve been debating what to do with the money. Pay off one debt (the only card left which will be paid no matter what by November this year, or my student loan. DH loan is too big to pay off in one go) and put the rest to retirement? All to retirement since we started later than we should have? Spend a little on short trip as a family, then the rest towards responsible things? (short like 2 nights and in a fun little town 2 hours away–can be a day trip but makes for a long day and we haven’t gone away in forever..the adults in the house feel antsy, we used to travel every couple of months.) Or, having run the numbers we could take that, and tighten up in a few areas and have a house downpayment. But that means a second car will be non-existent option for a long time, so the house needs to be in a walkable area. and no trip, and cutting other extra spending for little things we like to do. Or send LO to Montessori in fall (in 18+ classroom). That would take up most of the extra money. If we don’t send LO this year we have to wait until the following fall.

    We haven’t made a decision, and making these decisions makes DH anxious and keyed up. So I reminded him 1) we don’t have to decide right this second 2) I’d like us to talk about what’s “enough”. Ever time I start that conversation I am given such a long list and we can’t do it all: travel, house, Montessori for LO, second car, how much (and how) to save for retirement, being able to rent someplace for a week in the summer…I love DH but we made choices early on that mean we can’t do ALL these things right now. We can’t count on him getting good raises and we can only rely on a consistent part time for me right now. (I always say yes to extra especially this time when I get to do neat things and be with a good team but that’s never promised to me and I know my contract says that. For now that’s ok.)

    My very long point is, we were just having this discussion last night and have no decision made. I’m trying to figure out how to guide us in making a decision and convince DH that worrying about the “right” decision isn’t helpful. All of the options mean giving up something else.

    • nicoleandmaggie Says:

      I have found that it’s really helpful to take the entire list and prioritize it before we have extra money. YMMV though!

      If it were us, we’d pick debt (assuming it’s high interest) or Montessori because both of those have the chance to increase earnings power and are thus investments that will make earning (thus saving) more money later easier. If retirement comes with a match (thus guaranteeing a huge instant return), I would pick that first, but if it doesn’t it would come after debt and daycare.

      House, second car, and vacations are lower priorities because those generally cause additional expenses without the upside of more income. They’re great to have when you’re flush with money, but not when you’re still in the debt-payment/income-building state. They can lengthen that state unnecessarily.

      • Rented life Says:

        As long as we continue to live in this area the second car is just nice but not needed. And we will probably keep living here. But without a second car I can get to Montessori. There aren’t buses that run where we live and the school is a 35 min drive 3 days a week. Husband needs car for his job. So that’s one to mull over. The school is so expensive and that’s a hard one right now–we don’t pay for daycare right now. I work weird hours to avoid that cost. I could only afford the half day 3 days a week (full dat must do 5 days. Not possible now.). So I’d drive into the city drop LO off for 2.5 hours and be stuck. No errand places nearby the school. There is no Montessori near us or in our town and the next closest schooling option in town doesn’t start til 3yo. Everything else here is just normal daycare which I can’t justify cost of when I’m home already.

        No match on retirement. My work offers me nothing. The credit card will be gone this year no matter what so I’m excited about that. The 2 day vaca was a thought because we are not good sitting put for so long -emotionally. The actual cost will be pretty low and I can still pay debt off. That one is more trying to asses our mental health.

        In short: yeah we need a list and a talk about it. Didn’t expect quote this much extra money! Usually it $100-200 and I just send it to debt.

      • nicoleandmaggie Says:

        It doesn’t sound like that Montessori is a viable option then. Your kid must be really good that you can work with the kid at home!

      • Rented life Says:

        It sucks but it’s the affordable option and I do as much as I can at night. Two days a week husband is home during the day and I can work all day. I can’t fathom dumping 1k a month on daycare (especially when my hours week to week aren’t always the same).

        Asked DH to make a list and prioritize. All the things ended up on the list.

  6. middle_class Says:

    I’ve been listing our big needs/wants on my blog so if I got an extra income boost, I’d probably just check things off that list! I have found it really helpful to periodically list out big expenses. Just writing it out helps me prioritize better.

  7. Leah Says:

    Extra boosts right now go toward retirement and 529. And vacations, I suppose, but we take those regardless as that’s a priority for us.

    If we got a large sum of money (anything above $10k), we would definitely throw all that into house downpayment savings or do a big jump in the 529. And, let’s be real, I would also likely donate a nice chunk too. I like to share the wealth.

  8. Cloud Says:

    An unexpected income boost now would go into adding on some of the extras we decided we couldn’t afford in our (hopefully) upcoming renovation project.

    In general, though, it would generally go towards travel. Or into a savings account for future travel (or home renovations). We’re very fortunate, and have most of the things we want. Except more space and more travel experiences, apparently!

  9. OMDG Says:

    An extra boost for us would go to our kid’s 529. I wish I had a tax deferred way of saving additional funds for my retirement. Sadly 403b’s don’t seem to apply to residents, as least as far as I can tell they do not.

    • nicoleandmaggie Says:

      That’s a bummer about the 403b. But one day you will have access!

    • Leigh Says:

      Can by you not use a Roth IRA at least? And as a resident, you’re in a lowish tax bracket, so you wouldn’t pay too much in taxes on investments in a taxable account. (I guess unless your spouse has a higher income.)

  10. Renting in paradise, an update | Grumpy Rumblings (of the formerly untenured) Says:

    […] 4K/mo.  That means I’m feeling a bit more relaxed about money, especially with a month of summer salary also happening.  If our house rents out, we’ll be able to make our savings […]

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