November mortgage update and dealing with escrow after the mortgage is gone

Last month (October)
Balance:$5,107.51
Years left: 0.416666667
P =$1,189.48, I =$24.93, Escrow =$812.79

This month (November)
Balance:$3,913.33
Years left: 0.333333333
P =$1,194.19, I =$20.22, Escrow =$812.79

Right now we spend $812.79 each month in escrow.  After the mortgage is gone we will be paying property taxes and insurance directly.

There are a number of different options for how to pay for these.  I could continue saving $812.79 each month.  I could pay the insurance monthly via credit card (for a small “processing” fee), and the property taxes in two lump sums.  Or I could save up an additional 10k in our all-purpose emergency fund and pay each of the bills once a year when they’re due.

The last option seems the least hassle, mental and otherwise for me.  Starting in March I will aim to keep our savings account at 31k (though it may take a few months to get there).  In July we pay insurance and in December we pay property tax.  Then we’ll refill as we get paid.  We’ll lose some in say, stock market gains, but it’ll be safer in case DH loses his job.  (Dear Hillary Clinton, please get congress to fund research.)

It is possible that if we both continue to have high incomes that I’ll start playing the pay property taxes twice in one year (and itemizing) and zero times the next (and taking the standard deduction) game and time donations to match, but we don’t have to worry about that this year given my leave last year.

Do any of you pay house insurance and property taxes directly?  How do you save for them?  How do you time payments?

October Mortgage update and totally wasn’t paying attention

Last month (September)
Balance:$6,296.99
Years left: 0.5
P =$1,184.79, I =$29.62, Escrow =$812.79

This month (October)
Balance:$5,107.51
Years left: 0.416666667
P =$1,189.48, I =$24.93, Escrow =$812.79

Turns out these mortgage updates have been a lie since March 2015.  We accidentally double paid our mortgage in March 2015 because our check got delayed in the mail somehow an then we did a last minute online transfer so there was a double payment.  We vaguely remember when this happened, even though we clearly didn’t put it into medium-term memory long enough to wait to send a mortgage check.

I noticed that this happened last month when we got the Sept bill a little early and I was like… wait… why is this not due until October?  Some sleuthing reminded us of the previous mix-up and I decided to just not pay the October bill until this month.  So now the numbers above aren’t a lie except for the few pennies that Wells Fargo steals from us with rounding errors every few months.  I get the numbers directly from our mortgage spreadsheet and apparently haven’t tried to reconcile them since March 2015 or earlier.  I mean, I look at the check and make sure our previous month’s payment went through but I’ve never paid that much attention to the balance– by the time we get the new bill I’m already thinking about the next month’s balance, so the number never threw me off since it looked familiar.  Maybe if I’d gotten two months off…

I’ve definitely had a lot more inattention to our finances than we used to.  That’s mostly because the penalty for getting things wrong isn’t a big deal right now.  Being able to be relaxed about finances is pretty amazing.  We are lucky and I’m glad we made earlier sacrifices to be able to capitalize on that luck.

I thought about just paying off the mortgage again this month, but then I was like… ungh, I’d still have to figure out how we’re going to be saving for escrow and that sounds like a pain.  Plus all the paperwork with actually closing out the mortgage and making sure all the escrow they’re keeping gets back to us and so on and so forth.  We have enough money in our Wells Fargo accounts from reimbursements right now that we wouldn’t have to worry about paying a $15/mo checking fee, but keeping track of that also sounds like a pain.  I am so hassle-averse.

If we have time over the holidays maybe I’ll deal with all of that then.  Otherwise I’ll just keep writing a check each month until March.  Except, you know, last month, when I let things catch up.

September Mortgage Update: And what did we do with the leftover money?

Last month (August)
Balance:$7,481.78
Years left: 0.5833333333333333
P =$1,180.12, I =$34.29, Escrow =$812.79

This month (September)
Balance:$6,296.99
Years left: 0.5
P =$1,184.79, I =$29.62, Escrow =$812.79

Saved from prepayment ($0)

I have to admit, I was pretty tempted to pay off the mortgage this month just so I could put off some of the decision of what to do with our unspent leftover money from paradise.  That would only save $52.43 and only account for $6,296.99 and, to be honest, I’m not yet ready to give up this monthly post.  Plus I kind of like the idea of being done with the mortgage on my birthday.  Irrational!

Here’s what I did:

  1. I did have some pre-payment I could do, specifically to the US government.  I sent them the remainder of our estimated taxes plus some extra since I got some untaxed honoraria and writing fees.  $4,305.
  2. Hid traces of my stupidity from last summer when I scraped my car against the side of our garage TWICE right before leaving for paradise.  New bumper, front lamp, and fender:  $1,265.  (Surprisingly, this is still less than the car is worth!)
  3. Bought a second (custom-made Amish wood) filing cabinet:  $1,479.
  4. Tree removal and stump grinding (one of our remaining two ornamental pears fell over):  $563.
  5. Donors Choose.  I know I said I wasn’t going to do charity with this money, and I probably shouldn’t even count this since it’s only $200, but NPR had this story about a school in Louisiana losing its entire library and… (we also sent $100 to DH’s sister as a housewarming gift since they just bought, but I’m not counting that):  $200.
  6. Home laser removal thing:  $450
  7.  Vanguard Admiral Shares VTSAX:  Vanguard Total Stock Market Index Fund.  Because it has the lowest expense ratio and it seems pretty diversified and I have plenty enough bonds in our retirement accounts and emerging markets etc. are just so expensive.  Please don’t let Trump be elected president so I won’t regret not having put more money in international funds.  (Not that international funds will necessarily be doing well either!  Not even US Treasury bonds!):  $30K.

That leaves about 2K extra over and above what I want as an emergency fund, but I’m not getting paid for another month, and the stock market could be in freefall, and etc., so I think I’ll be happy to have the emergency fund stay a little extra padded this month.  I think what I will want to do is wait until we get 10K extra in savings and then put money into more admiral funds.  Maybe I’ll be more adventurous with diversification with additional 1oK lumps.

Fingers crossed, other than the cosmetic damage, my car seems to be in pretty good shape.  Hopefully I can put off car-buying for another few years.

If we didn’t have this extra cash, we definitely wouldn’t have spent more than a thousand dollars on cosmetic damage on my car, and instead of getting a second filing cabinet, we would have either culled, scanned, and shredded or we would have stuck some bankers boxes in the attic.  I feel a little bit guilty about the filing cabinet but it is so beautiful.  Oddly I didn’t feel guilty about the first cabinet or the similarly priced Amish recliner that I sat in while pregnant with DC1 and had to get, but maybe it’s because we had to save up several months and make sacrifices for both of those items.  In this case we already had the money.

We also started maxing out DH’s retirement, but it turned out we’d actually already been contributing more than I had thought, so that’s only 5K more over the course of the year.

We decided not to do a backdoor IRA because we’d like access to the money should we need it short-term without hassle.  (Also we want to avoid the hassle of putting it in there.)

We opted no on the kitchen renovation for now mainly because we just don’t have the time.  Partly because DH’s company only has enough money to get through February and cash in hand (or in the stock market) is better than a mostly done kitchen renovation that has gone over budget and taken all our time.  DH has gotten 3 head-hunter emails over the past month so it’s hopeful that he’d be able to find work should his current company go under, but we might not end up staying here and the market for houses in our neighborhood is so hot we could probably get away with not redoing the kitchen.

DH was pushing for cosmetic updates on the bathroom, but I wasn’t excited about them, so we decided not to do that.

DH went all over our neighborhood to see if anybody xeriscapes and only people with tiny lawns, big shady trees, and in hidden areas that aren’t immediately visible from the main roads seem to.  Plus we can’t think of anything that wouldn’t have to be sprayed to prevent bermuda grass (other than, of course, our thirsty St. Augustine).  So we’ve tabled that.

Not only do people not have solar panels in town, but the BBB has some really nasty reviews about the solar panel provider.  Plus our roof is neither new nor in need of immediate replacement, so…

And we’re not redoing the floors because we’re lazy.

So… yeah, laziness.  (I just spent 5 min trying to find our post where we talk about how being lazy can lead to saving money, but I gave up…)

August’s mortgage payment and rejiggering the emergency fund

Last month (July):
Balance:$8,661.89
Years left: 0.666666666667
P =$1,175.46, I =$38.94, Escrow =$812.79

This month (August):
Balance:$7,481.78
Years left: 0.5833333333333333
P =$1,180.12, I =$34.29, Escrow =$812.79

This is the first time in a long while that we’re not saving up for something big.  DH may lose his job, because jobs aren’t guaranteed, but he’s not planning on leaving his job any time soon.  I’m not eligible for leave for another 5+ years.  There’s not really any reason to hold onto large amounts of cash.  Certainly not the 84K that we ended up having in savings before we left for Paradise.

DH’s salary is also substantive enough and year round enough that we don’t really have a long unpaid summer like we used to.  I think we will be spending more than his take-home pay in the summer, especially since that’s when a bunch of our big annual bills come due (mostly insurance), but there’s a big difference between being a little short and having literally no summer income.  We don’t have to have quite as big a chunk come May as we used to.

On top of that, we were paying a year’s tuition of daycare and/or salary in September, about a month before we got paid so we needed money for that as well.  We’re no longer doing that because DC1 is going to public school and we no longer trust daycares to not go out of business.

Previously I mentally partitioned our savings account into “summer expenses” for the 3 summer months without income, “DC1 tuition”, “DC1 summer camp”, “DC2 daycare”, and “emergency fund”.

This year I’m going to try something different.  I’m going to try to maintain 21K in savings all year round and call it the “emergency fund”.  I won’t save extra from each paycheck for summer expenses leading to a gradually increasing savings amount.  I’m just going to have 21K in there.  I will allow it to dip below that during the summer, but I’ll try to keep it above, say 14K.  If DH loses his job or something, then we’ll sell some stocks, but otherwise 21K should get us through until the next paycheck(s).

It occurs to me that if I weren’t lazy and if rates weren’t so low, it would make a lot of sense to put that 21K into a 9mo CD or into a three month ladder of CDs that come due.

Where did I get the number 21K?  Well, mostly I just pulled it out of my posterior region, but IIRC, it’s about 3 months of expenses (when we’re not living in Paradise) when we’re living large and then some.  It is also enough to cover pretty much any major emergency other than a car purchase.

What will we do with the rest of our income?  No idea!  Maybe we’ll figure something out next month after everything has settled down.  Right now I’m leaning towards lumps to a taxable Vanguard account, but first I will need to drive my car for a month to see if it needs to be replaced.

What are you all doing for an emergency fund these days?  Does how much cash you have in savings change over time?

July Mortgage Payment and what to do with ~40K, give or take

Last month (June):
Balance:$9,837.36
Years left: 0.75
P =$1,170.83, I =$43.57, Escrow =$812.79

This month (July):
Balance:$8,661.89
Years left: 0.666666666667
P =$1,175.46, I =$38.94, Escrow =$812.79

Amount saved from prepayment:  $0

Before going on leave we saved up $84K in the slush fund so that we could live in Paradise (where everything is at least 2x as expensive as where we normally live) on a lower income without worrying about money.  It looks like we will have about 40K leftover (give or take) after subtracting out our summer emergency fund and moving back expenses.

We have been doing quite nicely since DH quit academia and got an industry job.  I still can’t believe our good fortune.  (Though I am not sure how long it will last!)  Definitely a different world than the one we were inhabiting even 3 years ago.  For the first time in a long time there aren’t obvious places to stash more money.

Last time we had ~25K extra, we threw it into the mortgage.  Before that when we had large chunks of extra untargeted money, we saved them in retirement vehicles.

So, for people who aren’t long-term readers, here’s where our monthly nut after bills has been going since DH got his industry job:

  1. We max out all of my retirement options
  2. We pay up to the match with DH’s retirement (it has bad fees)
  3. We are no longer eligible for tax advantaged IRAs unless we do a backdoor conversion.  So we don’t do IRAs anymore.  If we were eligible we’d totally to this.
  4. $500/mo in each child’s 529 (This is not enough for 4 year private schools without financial aid, but DC1’s is getting too big for 4 year public or even a 4 year private should our income fall and we become eligible for financial aid.  I debate on whether or not to stop contributing, but figure we can stop DC2’s contributions later if DC1 has too much.)
  5. Previously we had been saving for a year in paradise with me at half salary, but we won’t be doing that anymore.
  6. Mortgage.  You will note that the mortgage runs out in 8 months and there’s not much point to prepaying at this juncture.

We have a LOT of money put away for retirement and for college.  Most of our money is in retirement savings, and most of that money is in the most difficult to tap form of retirement saving (the 403b).  That makes maxing out DH’s retirement account with the high fees potentially less attractive than saving the money outside of retirement accounts (in case we move to Paradise someday and want to buy a house), or you know, just spending it.

In terms of taxable stocks, we have around 125K in an account we could just tap.  We have about $300K in home equity.  Sadly, this is not enough money to buy a house in paradise with 20% down in a good school district, and it would be pretty risky to try.  We do, however, think this makes a pretty reasonable secondary emergency fund.  Combined with our primary emergency fund in savings, we figure that if DH loses his job we’ll be ok just living on my salary where we normally live until we figure what else to do.

So that leads us to this money we saved for Paradise but didn’t spend.  Here are our options (in no particular order):

  1. Start maxing out DH’s retirement even though it has crappy fees (~15K/year over what he’s already contributing).  We may do this anyway as we’ll probably be generating a surplus with both our salaries next year.  [update:  I miscalculated, it’s actually only 5K more than what he’s currently contributing– we put in the request to max out today.]
  2. Figure out how to do a backdoor IRA ~11K
  3. New car (if my 2005 Hyundai Accent that I love continues to have check engine problems once we get back) ~$30K
  4. Kitchen Renovation ~$30K.  The triangle just isn’t quite right and our countertops suck and the sink is chipped.  The problem with this is that it will take our time which will be in short supply when we get back and there’s been a small construction boom in our town meaning that construction costs are higher and take longer than usual.  We don’t know how long the boom is going to last.
  5. Bathroom renovation ~$10K.  We don’t really need this, but we’d kind of like to replace the plastic shower with a tile one and maybe get rid of the gold accents in the bathroom.  Totally cosmetic and unnecessary.  This would be unlike us since we don’t normally replace things until they need to be replaced.
  6. Xeriscape the lawn ~$?? We have no idea.  Problem:  Bermuda grass may make Xeriscaping an expensive failed dream unless we can get more trees to stay alive (an endeavor we’ve already lost quite a bit of money on).
  7. Solar panels ~$20K.  There’s basically nobody in our town with solar and we’re wondering if there’s a reason for that.  Lots of people do, however, have the black shades over the outside of their windows.
  8. Charity– I don’t think we’re going to direct this money to that.  We usually do charitable giving in December.
  9. Looking through old “things we wish we had money to do” posts, I notice that we wanted to replace carpet with hardwood in our dining room.  We probably still want to do that, though it’s not a high priority.  I think that would cost under $5K, though I’m not sure how much under.

Also… since we’re not saving for Paradise and we’re not putting extra to the mortgage and DC1 is trying out public school… we’re probably going to have extra untargeted money once school starts and I start getting paid again.  I don’t yet know how much that is going to be.  Or what to do with it.  I’m thinking DH’s retirement (even though it has ridiculous fees) or backdoor IRA Roths (the lower fees may make the hassle factor worthwhile) and then more taxable stocks. But I dunno.  It’s like, we would need so much more saved to be able to buy a house in Paradise, but we don’t need that much to live in our small town.  But might as well save until there’s a good reason to spend, you know?

What would you do with a 40K windfall (of money you’d saved but didn’t need in the end)?  If you’d save it, how would you save it?  If you’d spend it, what would you spend it on?

June mortgage payment and musings on interest saved near the end of the loan

Last month (May):
Balance:$11,008.18
Years left: 0.833333333
P =$1,166.21, I =$48.19, Escrow =$812.79

This month (June):
Balance:$9,837.36
Years left: 0.75
P =$1,170.83, I =$43.57, Escrow =$812.79

Amount saved from prepayment:  $0

Three quarters of a year left on the mortgage.  That’s 9 months.  There’s less than 10K remaining.

We could pay it off pretty easily at this point even as we enter the unpaid summer and the end of our expensive year in paradise.  (Watch the savings account drain with living and moving expenses!)

But if we paid if off, do you know how much we would save in interest?  $180.20.  One hundred eighty dollars and twenty cents.

That’s not much.

Paying down 10K at the beginning of a mortgage can save huge amounts in interest, even with inflation taken into account.  But near the end, it’s the price of a pair of European shoes.  Or the reward you might get for opening a new bank account.  Or a fancy dinner out.

So even though it would be easy to pay off the mortgage right now, there’s really no point other than saving the hassle of writing checks, which isn’t a hassle that particularly bothers me.  But putting lump sums towards the newly refinanced mortgage 5 years ago made a lot more sense in terms of interest savings.

Would you pay off a 10k debt in a lump instead of over 9mo in order to save $200?

May mortgage update and would you prepay or increase your monthly payments when the escrow increases?

Last month (April):
Balance:$12,174.40
Years left: 0.91666666667
P =$1,161.61, I =$52.79, Escrow =$809.48

This month (May):
Balance:$11,008.18
Years left: 0.833333333
P =$1,166.21, I =$48.19, Escrow =$812.79

Amount saved from prepayment:  $0

Our escrow went up as it does almost every year.  When this happens, Wells Fargo gives us the option to pay the difference upfront to keep our payments the same or smaller.

Used to be when this happened I’d pay the difference so I could prepay more each month when I rounded the number up to a round number when writing the checks.  Also I like paying stuff early so I don’t have to worry about it later when I might have less money than I was expecting.

But we’re not currently doing any prepayment (since Paradise is expensive and I’m at half pay), not even the little rounding up prepayments that we did when we were just starting the mortgage.  It bothers my OCD a little bit not to write a round number on the check, but I’m getting used to it.

And because we’re spending more money than we’re taking in (not counting retirement savings) and because we have less than a year on the mortgage and there’s not even a full year left for the escrow, I decided to let them increase our monthly payment for the second time this year.

(Note also that that $812 or more will be the minimum average monthly cost of home ownership once we’re done with the mortgage not including utilities or repairs– home ownership isn’t free!)

Would you prefer to pay increases upfront or to amortize payment increases?