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?