August Mortgage Update: On feeling comfortable about spending more than we earn

Last month (July):
Balance:$22,465.56
Years left: 1.6666666667
P =$1,121.04, I =$93.36, Escrow =$809.48

This month (August):
Balance:$21,340.08
Years left: 1.583333333
P =$1,125.48, I =$88.93, Escrow =$809.48

One month’s prepayment savings: $0

Yes yes, I know spending more than you earn, no matter the circumstances, is heretical among certain segments of the PF community (particularly the early retirement community, though presumably not all of them are living off dividends, some of them must be drawing down based on some % rule post-retirement).

This year I’m at half-pay and our housing, health insurance, and daycare expenses are approximately doubled.  We could actually make that work (barring big emergencies) without spending more than we earn if we didn’t eat out, cut down on organics, didn’t spend money on activities for DC1, were less quick to throw money at problems, and so on.  Essentially, if we cut down our discretionary expenditures from what we were spending before we got to Paradise.

But we planned and saved for this.  Right before we started having to spend out with deposits, moving expenses, and so on, we had saved 84K in checking earmarked for this year.  (Technically 20-30K of that is emergency fund and money for next summer when I’m not paid at all, but that’s still at least 54K earmarked for increased expenditures and riotous living.)

We want to be able to enjoy living someplace where there’s things to do and food to eat.  We want to take day-trips and go to restaurants and have the ability to say “yes”… just for a year before we go back to our small town where we have to drive 2 hours to get to the nearest real city.  Where it’s harder to spend money.  There’s lots of free things we want to do around here too, but for the year, we’d like to try some of the not so free stuff as well.

And gosh darn it, I want to be able to do it without feeling guilty!

How best to do that?

Well, one of the things that bothers me is when I have to transfer money from savings to checking.  DH’s paycheck goes to checking while mine goes to saving.  Whenever we spend more than he makes, I have to transfer money from savings to checking.  That always provides a check on the spending… if I have to transfer more than the usual amount, I feel guilty and cut down on spending.

But in this case, I don’t *want* that guilty feeling or that check on spending.

Still, I also don’t want us to go hog-wild.

So… I sat down and figured out how much over our regular amount we should be spending, multiplied that by 12, and transferred that lump sum amount from savings into checking.  (The interest rates on both savings and checking are small, but the rate on checking is marginally higher.)  When that amount is gone, then we really will need to put the brakes on spending.  There’s still plenty extra left in savings as a cushion, but depending on when we run out of the checking money, we will be able to re-evaluate at that point if we want to transfer more, cut down our spending, and so on.  Rather than making adjustments every month, we’ll make an adjustment if the money runs out.

Will the money run out?  Previous experience suggests that we tend to spend a lot of money when we first move to a place, and then settle down into predictable less spendy patterns wherever we are.  I imagine that will happen here within 12 months as well, after we’ve done the museums and zoos and tourist traps and have figured out where the best low-cost and free things are that will make up our regular routines.  We’ll get closer to spending what we actually earn, possibly a little less.  But we’ll see where that crossover point is!

Do you ever feel guilty about spending money when you shouldn’t feel guilty?  Or the opposite– do you sometimes not feel guilty spending money when you think maybe you should?  What do you do to manipulate your feelings about money so they match up with your thinkings?

Why it is so important to get out of debt and to start investing

In 2005, I had 50K in the taxable stock market.  How did that happen?  We got rid of DH’s debt really quickly by living on beans and rice (more accurately, potatoes and marked down produce).  Then we lived like regular graduate students and kept our expenses low.  Finally, we saved up the money we would have spent on rent for two years from when we were resident assistants.  That’s where the big money came in.

This post isn’t about how we got the 50K though.  I’m not actually sure how much we put in (I don’t have the cost-basis information at hand), though I’m fairly sure it was less than 50K (probably more like 36-40K, because that’s what we saved on rent).  This is what happened *after* that 50K.

In 2005, I got a real job that allowed me more room to save for retirement than I could use.  That meant I stopped putting money in the taxable stock market and put it all in tax-advantaged funds.  So that 50K from 10 years ago is a point-in-time snapshot.  It’s all in index funds and ETFs (mostly the S&P500 and Nasdaq, with a little bit of the Dow– essentially your three major ways of measuring the market).  Earnings are all set to DRIP.  I haven’t added anything to it, I’ve just let the money ride.

10 years later (as of this writing), that portfolio is worth $126,000.  That is double and a half.  252% of what it was 10 years ago.  That’s including the worst recession since the great depression.  I just let the money ride all the way through (even/especially during the dark time when it dipped below 40K).

Contrast that with DH’s unsubsidized student loans at 8.5%.  He owed 10K (quite a bit more than he actually borrowed).  If, instead of paying those loans, he’d deferred them during graduate school, he would have owed $15,227.95 at the end of that deferment.  That’s a 50% increase.  If he had followed their suggested payment schedule after that, 5 years from now with his last payment he would have paid a total of $26,992.80 on that 10K loan.  That’s a ridiculous cost for borrowing money.

I can’t even comprehend credit card levels of interest, which average around 15% and can get much higher.  Just that 8.5% student loan had me literally hyperventilating when I found out about it.

The downside of high interest debt is that it takes money away from you without you getting any benefit from it.  It puts you in a precarious situation because you have to make those payments (or go through a lot of heartache and hassle to get them deferred or negotiated down via bankruptcy)

I was running through the thought exercise about whether or not we could live in Paradise on just DH’s take-home salary (something we’re not doing next year) if we sold the house and the answer is that after the big expenses rent, daycare, health insurance, and retirement, we would have about $1050 left to spend on everything else, from car insurance to riotous living.  Currently we spend 2-4K on everything else.  That would be a pretty big cut.  But… we have a lot of money saved.  And that money is making money.  We could stop contributing to retirement at this point and we might still be ok, so long as we picked it back up after the daycare expense was gone.  We could undrip our taxable stocks and that would bring in some income.  We have a cushion that would last us until I found work.**

We’d be ok.  And although having this cushion/buffer/etc. did take hardship and sacrifice early on, having killed the debt and invested a bunch means that money is now working *for* us keeping us from having hardship and sacrifice now.

High interest debt takes money away from you without giving you anything in return.  Investment gives you money without you having to do anything to earn it.  Make your money work for you.  Sacrifice and save early so you don’t have to sacrifice more later.  And early can mean today, because today is always earlier than tomorrow.

Compound interest is amazeballs.  Unsubsidized debt sucks potty words.

Have you experienced the joy of compound interest or the drain of high interest debt?  How did you get there/how did you get out?

**Not that I have *any* plans to quit my job!  But I did have this horrible worry that I would get squished by a semi truck while biking to work next year and DH would have to fend for himself without my half salary.  Then I remembered that he’d also get 500K from my life insurance plus funeral expenses from my work insurance which should tide him over until he decides which city he wants to move himself and the children to after the year is up (oddly, he refuses to make that hypothetical decision now and says I’m worried about unlikely events because I’m stressed about the move!).  So the exercise was moot.

Ask the grumpies: What to do with 25K and some other concerns

Pondering25K asks:

I have a financial question that my spouse and I have been mulling over for a few months and wondered if we could tap into the expertise of you and your readership.

Here’s our situation.

We have about 25K to throw at some of our debt, and can’t figure out the best place to put it. Our feeling is that both major options we have thought of are good, but we’d like more advice.

We have a 30 year fixed rate FHA mortgage with a 3.25% interest rate that we have been prepaying about 800 extra per month (our interest + principal payment is 1500). The mortgage currently still has 27 years left, since we refinanced a few years ago. We have a $335/month PMI payment that will go away in 2 years if we reach 80% loan-to-value ratio. This will happen if we prepay with the 25K. If we don’t prepay with the 25K now, we will have to prepay more than we are currently each month to reach the 80% loan-to-value ratio. We cannot re-amortize our FHA loan to recover this cash in the future.

We also have a car loan with a 2.99% interest rate and about 5 years left (it had a 6 year term) that has a $405 monthly payment. The payoff balance is slightly under the 25K, so we could kill this loan now.

We have a better-than-required amount of money saved for retirements in IRA, 401Ks, and a teacher retirement plan, and are maxing everything out already. We also have started saving for our toddler’s education in a 529, and contribute $260/month to that.

My salary is 60K, but will go up each year as I just started as a teacher and will move up the step system. It is pretty secure, unless our state budget was drastically cut and they got rid of my entire school system (it’s run out of the state Dept of Ed).

My husband’s  base salary is 130K, with bonuses that are pretty significant, but not guaranteed. His job itself stable, but he’s not happy there. If he were to find a job he liked, it would likely involve a change to a much lower paying career, or starting a small business of some sort.

We can’t re-amortize at any point (a major disadvantage to an FHA loan). We have thought about refinancing to have a mortgage where we could, but the interest rates are higher and closing costs would be around the same as the amount of PMI we would pay in the next two years.

We are torn between lowering our monthly expenses now and saving money long term. Both of these are important to us, as we would like flexibility in case of job loss or the desire to switch to lower paying careers. We don’t want to be trapped by our mortgage payment.

Standard financial disclaimers apply.  We are not financial planners and everyone should do their own research and/or consult with real financial planners before making major financial decisions.  Our opinions are opinions, apply at your own risk.

First to answer the question you actually asked:  Should you put the money towards your mortgage or your car loan?

Unless I’m missing something [UPDATE:  See discussion below about FHA loans compared to private industry loans– depending on the circumstances, I may have missed something], paying down enough to get rid of PMI dominates (or matches) the benefits of paying down the car loan (assuming you’re not planning on ever declaring bankruptcy, foreclosing, or getting a car repossessed).  First, it has a better return on investment given that 1.  You’re still early in the mortgage, 2. the interest rate is higher, 3.  PMI is a big additional chunk.  Second, dropping a $335 monthly payment isn’t really that far off from dropping a $405 monthly payment in terms of solvency given the numbers you’ve been throwing around, so if you need to lower required monthly payments you’re not actually gaining that much from paying off the car vs. getting rid of PMI.  Not nothing, but there are other places to cut that would give you more bang for the buck.

And now for the question you didn’t ask.  You’re currently making 190K plus bonuses.  You are very high income.  It’s great that you’re putting so much money away in retirement, but unless you have (and are using) the ability to put insane amounts of money away for retirement (for example, you’re saving in a 457 plan in addition to the standard pension, or your spouse is putting money in a Mega Backdoor Roth IRA), you might want to try cutting  your spending and funneling the extra money towards a large emergency fund and possibly some taxable investments.  Why?  You note that your DH is not happy with his job and may want to leave the job for a lower paying career or starting a small business with its attendant risk.

Think about what kind of paycut he is likely to have, and run some emergency scenarios (a financial fire drill in the words of Donna Freedman).  What savings would you stop?  What spending are you required to make?  What changes might you need to make long term?  How much would your DH need to bring in to supplement your salary given the step schedule?  Once you have all of that information figured out, try living on the new salary just to see what it’s like.  While you do that, funnel that money you’re no longer spending into a healthy emergency fund that you can easily access and into your car loan in order to decrease your required monthly payment (2.99% is a low interest rate compared to long term investment, but it’s higher than what a savings account will give you these days).  This will allow you to feel what it’s like to live on a lower income and make adjustments now while there’s no danger from making mistakes while also saving up so you will be able to weather emergencies while on that lower income in the future.  (This is also a standard recommendation for planning for a spouse leaving the labor force to take care of a child.)

There’s a lot to be said for being able to let a beloved spouse quit the job he dislikes if he wants to, even if it brings in a good income.

Books you may find helpful:  Your Money or Your Life, All Your Worth.

Note here that if the couple were lower income, I would suggest cutting some of the long-term savings rather than spending to boost short-term savings for two reasons.  The first being that lower income families get more financial aid so the 529 should be a secondary consideration after PMI and after the car loan.  The second would be that they would already be spending less and would both have less slack in their budget now but would also be unlikely to have to cut as much spending later (as the going from 130 to a lower salary isn’t as big a drop as 50 to the same lower salary).

Additionally, if they didn’t want more flexibility, then their current plan would probably be fine since their jobs are secure.  But the need for freedom is important, even if that freedom is never acted upon.  The ability to leave a job is a wonderful freedom to have, and worth more than a lot of kinds of spending.

What do you think, grumpy nation?  Did I miss anything with the 25K?  How about the other advice?

amazon prime = I buy more stuff (from amazon at least)

Huh, Amazon is having a big “prime” day on the 15th.  We didn’t know that when we first queued up this post.  Go us?

#1 had resisted getting Prime for a long time.  Not because of the annual cost of the thing (we spend more than that on Netflix each year), but because of the behavioral changes I worried might come with it.  It’s not so bad to wait for products– waiting encourages introspection and makes it easier to put something on the wishlist since getting it in 7-10 days isn’t so much different than getting it at the next holiday (or failing that, getting it at Target on the weekend).  Once it’s on the wishlist it either displaces a potentially unwanted present, or it might no longer be needed.

Without Amazon Prime I would also batch up orders to make sure I could get to $35 before purchasing to get free shipping.  Though sometimes if I needed something, I would either have to pay shipping or find something I didn’t need right away to add to the list (but, of course, there’s always the wish-list for those items).

But then I needed Blues Clues and Dora the Explorer because DH had taken the ipad and its children’s games with him.  We do have Netflix, but at the time it mainly only had PBS Kids stuff (now it’s got a lot more variety, like My Little Pony, which I swear is the best show on kids’ TV these days, except maybe Doc McStuffins).  Also DC1 wanted to read more Diary of a 6th Grade Ninja and that’s on the list of things that can be read free (one book a month) for Amazon Prime members.  So we did their free monthly trial.

Like many technology things, Amazon Prime is one of those things that you don’t need until you have it and once you’ve had it it seems essential.  Yes, it has increased our amazon spending– if we need something soonish, we really do just go on amazon and order it.   This is especially useful for when we get a flyer from school at the beginning of the week saying we need something by Friday.  However, it has also, I think, cut down on our Target and Home Depot purchases.  So I’m not sure what the overall net effect is on spending and stuff-acquisition.  The number of amazon boxes randomly showing up at the house seems to have slowed in the months since we first got it, though I’m not sure how much of that is due to the Prime effect slowing down and how much is due to, you know, getting ready to move.

Should you get Prime?  Probably not, unless you care more about convenience than spending and stuff acquisition, which you may.  Or really want Nickelodeon kids’ television.  Once you have it, you may find it hard to ever give up, even after the free month is over.

#2

The shelter put the foster kittens on a kind of kibble that I can’t find in my local stores, so I ordered it from Prime rather than driving around to any more stores.  Also the special kitten-safe litter, just because that’s heavy and awkward to carry home from the store 2 blocks away with the other groceries.

Privilege, I haz it.  And it’s super-great!

I shop through smile.amazon.com, which is the exact same as amazon (same interface, account info and preferences) except it also donates to a charity you choose.  Not a lot (a Google search suggests .5% or $5 for every $1000 you spend), but more than 0.  Partner and I don’t factor this in to our yearly charitable donations.

This post is not a plug, we don’t get paid for this post (though we do get paid a bit if you buy any stuff through affiliate links).  We’re just spitballin’ about the conveniences of our lives.

We know very well that Amazon can treat people badly.  We are not unconflicted about this.  But the convenience is just too much.

Do you use Amazon Prime?  Why or why not? If you do, have you noticed it affecting your spending habits at all?

Ask the grumpies: save for retirement or save for graduate school?

P asks:

I’m a fairly recent graduate, 23, and just started my first real job as a paralegal at a big law firm at a salary of $42,000 a year.  I will probably start graduate school, most likely in law or another $$ professional master’s program, in the next five years. (Future schooling is an important goal for me.) After grad school, I could be in biglaw, making very good money, or elsewhere, probably not making as much. Should I be directing money to grad school savings or to retirement? What would you do?
Other considerations:
  • I have ~60,000 from an inheritance in an investment account–This could be used for school, or I could think of it as my retirement nest egg. It’s in a mix of no-load/no-fee mutual funds.
  • Looking at my budget now, I’m planning to save definitely $500/mo, and probably up that to $600 once I’m more confident about what my general living costs will be.
  • I also have probably over-budgeting for general spending (groceries, entertainment, eating out, clothes, etc.), by maybe $100/mo, and I was planning to save the rest of that for travel.
  • There’s no match in my employer’s 401(k) plan, but in a year I’ll be eligible for profit sharing. I…don’t know exactly what that is or how it works yet, but I have a year to figure it out!
  • No student loans. (Grandma, thank you!) No other debt.
  • $2000 in a traditional IRA
My long-term financial goals:
  • Pay for my hypothetical future children’s college at whatever school they want to go to, possibly with help from my parents. (No kids for probably close to ten years)
  • Travel as much as possible
  • Flexibility to quit a job, take a lower-paid job, etc
  • Live reasonably well. (Right now I live in a cheap, gross apartment BUT it’s in a great area and I have an indulgent $70/mo. membership to a nice gym.)
  • Retire, at some point in the very far future
So where should I put my savings? Should I open a 529 with the thought that I’ll probably use it, and if not, my kids will appreciate the early help? Split it half and half? Some in the 401(k) and some just in my regular investment account? In a year, when my profit-sharing kicks in (???), would your response change?

All righty, first a disclaimer– this is a bit more complicated than our usual financial questions and we are not financial planners.  Always do your own research and/or consult with a fee-based certified financial planner before making big money decisions.  When we say “you” here, we’re actually answering the question of what we would do in your situation.

First off, if you had an employer match, generally the no-brainer thing to do would be to put in money up to the match amount because the return on investment there is larger than anything else.  But there isn’t an employer match.  :(   Once the profit-sharing starts, it’s likely that the best bet will be to begin to contribute up to the match and then convert your company stocks to index funds as soon as your holding period is over (you don’t want to be in an Enron situation where your retirement savings are all in company stock– that increases your risk).  You will have to look carefully into the details of your company’s program when that time comes.

Before that time period, the next thing you should consider is the Roth IRA.  Roth IRAs are extremely flexible– they’re great for retirement, but the principal can be taken out penalty free while the earnings remain in the account.  Although you probably won’t want to take money out once you’ve put it in until you’re actually ready to retire, they provide more flexibility than your company plan, 529, or traditional IRA.  Max this out before even considering the 529.

Because you are (moderately) low income, the money that you put away for retirement may have an additional tax advantage, the saver’s credit  during your first year of work.  For example, if you started your job during the summer so you’ve only got half a year of income the first year on the job, then you would get a credit for something like 20% of your contribution at tax time.

If you can’t afford to max out your IRA with your monthly income, gradually convert your savings into tax-advantaged savings.

So, what would we do in your situation?

1.  Max out the Roth IRA each year using a Vanguard Target-Date fund from Vanguard.  (Alternatively, just put it in the S&P 500 index– you’re still young and have time to diversify your portfolio manually.  There’s a small additional fee for setting and forgetting for the Target-Date fund and you don’t need any bonds at your age/distance from projected retirement.)  Use your inheritance savings to do this if you need to, though at your current savings rate, you may not (a lot will depend on calendar year considerations).  Be sure to get the saver’s credit at tax time!

2. Make sure you have a reasonable emergency fund that will cover, for example, moving costs, or late reimbursements.

3.  In a year, look into the profit-sharing option and see what you need to do to get that.  If it is manageable on your budget, go for it, but make sure to convert company money to index funds as soon as they allow it.  (This is assuming it’s a standard profit-sharing match where the company is already established, if it’s stock options instead… that’s a much more difficult question.)  If you can’t afford to get both the match and do the IRA (but you should be able to given your savings), look deeper into your budget/emergency fund.  It is most likely that you will want to contribute to the profit-share up to the match and then max out your Roth IRA as much as you can, but there are some situations in which the profit-share wouldn’t be as good of a value as the Roth IRA.  Note that if the match is good, even if you don’t plan on keeping the money in your 401k, you may still be better off getting the match and then taking the withdrawal penalty than not taking the match.

4.  When time comes to go to graduate school, look at your projected student loan rates (and whether they’re subsidized or unsubsidized– the government may change its mind yet again about whether or not graduate students can get subsidized loans) and compare them to stock market rates (use ~7% for comparison if you don’t want to put in your own number) before deciding if you’d rather take the loan or withdraw savings/IRA principal.

tl/dr:  Put it in retirement, but in a way that it can be used for school in a pinch (Roth IRA).

What have we missed, grumpy nation?

OMG we are spending SO MUCH MONEY

Mint keeps emailing to tell me that we’ve had an unusual amount of spending in various categories.  Usually we spend far less on these categories, Mint says.

I’m not even talking about the required increased expenses, like daycare costs doubling or our rent being 2x our mortgage.  I’m talking about the optional things that all those early retirement blogs would say we’re horrible people for doing and a few career women blogs would say we should do more of.

Turns out DC1 is a chatterbox when not in regular organized activities, so instead of having hir home all summer keeping hirself entertained with homework books, video games, novels, and the like, we quickly realized that ze will have to have some organized activities once we get to Paradise because we won’t have built-in playdates to take any of the edge off, at least not until school starts.

And the organized activities available through the park district in paradise look SO COOL.  Unfortunately the prices also add up.  $700 later, DC1 is enrolled in two week-long half day camps (engineering/minecraft/legos) and 2 week-long full day camps (traditional crafts + swimming + games + field trips etc.).  Also swimming for the rest of the summer at an additional $55/week for 30 min each morning.  There’s a lot of weeks left that ze will still be at home alone with DH and I’m not sure what we’re going to do about that.  The park district daycamps that still have spots for the remaining weeks are $300/week (10am-4pm) which we just cannot justify spending.  The YMCA also has some daycamps that are $250/week (7:30am-6pm), and we don’t know if they still have slots or not.  If DH goes crazy we’ll investigate those.  Or maybe DC1 will find neighborhood kids to play with, though I’m not really sure how one does that in these hyper-vigilant parenting days.

At some point I also said “screw it” on moving expenses.  We ended up not driving any of our stuff to Paradise except what will fit in a car or on the airplane.  For $1K we got a couple of big pieces of furniture that we needed (beds + mattresses) and a bunch of stuff we don’t really need, or a higher quality of stuff than we really need (like a wooden table with leaves and wood chairs rather than a folding card table with folding chairs) from a family moving away from paradise.  Then we needed to get a uhaul to pick it all up and I figured, why not get the 2br size instead of the studio.  And yes, we need dollies.  And hey, instead of getting day laborers who are potentially illegal immigrants at $15/hr, let’s spend $200 on a couple of people from a uhaul-connected moving company.  That way I won’t have a  Zoe Baird moment if the president wants to appoint me to government office decades from now.  So I dunno, is $1500 less than what we’d be paying buying cheap stuff new (with potentially free or cheaper delivery), browsing craigslist, and waiting for hand-outs from people wanting to empty out their garages?  Probably not.  But we saved some time.

We also ended up not bringing our piano, even though it’s digital, because it won’t fit in the car with all the electronics DH needs to bring in the car for work.  We might end up getting one free from a friend wanting to empty her garage, but we’ll still have to pay piano movers and probably a tuner.  We can rent one locally for ~$400 for the year including shipping.  Or we could buy a cheaper one from amazon for the year.  We’ll see what happens.

We’re also going to have to store my car for half the year (our tenants are allowing me to keep it in the garage until January, but then they’re planning on purchasing a second car and ours isn’t nice enough for them to rent).  That’s $400, though I could spend $250 on a parking permit at the university, but then I’d have to be vigilant about getting someone to move it the few occasions that the lot has to be emptied of cars.  The bluebook value is $3.5K, and logically I should just sell the car and buy a new one when we get back, but that’s a hassle and I’m attached to my car.

Then there’s all these after school programs at a few hundred dollars a pop (most of which I didn’t value at cost when DC1 was getting them for free in private school!) and we might pay for bussing at $800/year (which is a complicated subject– the school is 20 min away and the bus stop is 10 min away but closer to DC2’s daycare so DH’s drop-off/pick-up commute would be cut in half).

I’m also planning to spend a lot of $ eating out.  And I’ve got all these local vacations planned.  And fun activities for the weekends that will not all be free.

I keep going back and forth between “OMG we’re spending so much” and “screw it.”  I think, as is evidenced by not paying for the $300/week daycamp, that we’re hitting a happy medium that won’t leave us having to dip into our secondary emergency fund (the one in the stock market), but I’m not so sure that there will be money leftover from the trip to allow a kitchen remodel when we get back.  We will see!

Still, it’s hard to see the numbers in earmarked savings going down so rapidly.  Hopefully that pace will slow once we’re actually settled.

Have you been in a situation where you spend a lot more than you’re used to?  How do you feel when you spend a lot of money–Do you feel terrible, do you hit “screw it” and let the floodgates open, or are you super-rational about it?

July Mortgage Update: Renting a house for a year is a pain

This month (July):
Balance:$22,465.56
Years left: 1.6666666667
P =$1,121.04, I =$93.36, Escrow =$809.48

Last month (June):
Balance:$23,586.60
Years left: 1.75
P =$1,116.62, I =$97.78, Escrow =$809.48

One month’s prepayment savings: $0

We put our house on the market for under the market value.  We gave a $200/mo discount on top of that for a family to rent it furnished rather than unfurnished.  We only advertised on the university web-page and on sabbatical homes and the MLS.  No Craigslist!

A family from overseas contacted us right away.  They had their local friends look at it.  We had a brief discussion via the internet wherein the husband tried to bargain us down from the listed unfurnished price, not understanding that we were renting it for less than what he was trying to bargain it down to because he wanted it furnished.  The wife and I discussed daycares and leaving DC2’s outgrown clothing and toys since her child is a year younger and how much cheaper water is in the US than in her country.  We put the husband in contact with our real estate agent.  We hammered out all the details like dates.  The wife contacted the agent with a lengthy list of demands of things she wanted cleaned before they got here (all of which we were planning on doing anyway) and a demand that we get rid of some of our paper blinds which she thought were grey and covered in dust from her friend’s video, but are actually peach and what she thought was dust are shadows from the pleats.  We said no to replacing the blinds.

I got a few more contacts from less desirable prospective tenants (two dogs and a cat kind of less desirable– our HOA only allows two pets, or people needing the house for less time or wanting to bargain us down more), but they didn’t contact me back when I said we were in conversation with another family.

And then nothing for a few weeks.  With the end of the school year etc. we didn’t really notice things weren’t progressing, but once that settled down we wanted to nail things down.  We contacted our real estate agent, who said things were progressing.  And then a week later things stopped progressing.  So the real estate agent sent a firm email noting he’d been turning people away from looking at our house, and that activated some action from our prospective tenants, the irritated full professor noting that he is a very busy man in the middle of organizing a conference.  Which is no doubt true, but he really should have taken care of the lease before the conference!  He sent the background check information and passed the check.  And our agent sent the lease to sign both electronically and in pdf form (in case the electronic version wasn’t working).  And… then nothing.

So then our agent stopped turning other families away from looking at our house which meant we spent some time outside at the playground where it is very very hot.  The first new family to look at the place texted right away and said they loved the place.  They wanted it for the full time and they wanted it unfurnished (so another $4K for an additional 2 months + $1200 to rent unfurnished instead of furnished + the utilities we wouldn’t be paying those two months… but also plus hassle, storage, and potential breakage) and were willing to give us a deposit and signed lease right then and there.  We gave the family we had an agreement with until the weekend was over to get us the signed lease and deposit or we were moving on.  And they did.  So we turned the second family away and took down the sign on our lawn and the listing off sabbaticalhomes.

Hopefully this will all work out!

I do think it helps that we listed the place under market price and that we had two prices for furnished vs. unfurnished that reflected our desire not to move our stuff into storage.  We have more money than ability to deal with hassle these days, and it’s nice being able to just say, screw it, we have the cash for this, we can take a risk or pay to not have to deal with something.  Me five years ago (when DH was still a tenure track professor) would have been freaking out at every point, and we’d have had a higher listing price.  And I can’t even think what me when DH was between jobs would be doing.

Wish us luck!

Have you ever acted as a landlord, temporary or otherwise?

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