Hi,
I'm kind of new to the ERE idea, but want to learn.
Female
42 years old
never married, no children
I recently transferred for work from a smallish city to the largest city in the state, with a huge increase in housing costs and small increase in income. I basically emptied my savings to get out of my old house and into the new one. I did look for rental options, but was hindered by pet policies.
Gross Income: $112,000
Take Home: $69,676
Mortgage Payment: $1,530.85 per month/$18,370 per year (includes escrow; principal balance is $223,000, appraisal was $253,000 for a 2b/1ba house)
All other monthly expenses, including student loan payments, total about $1,450 per month/$17,400 per year
Nonmonthly expenses (insurance, medical, clothes, travel, auto maintenance/taxes, pet care, home maintenance, etc.) total about $15,000 per year
I don't have a car payment or any credit card debt
Retirement savings
401(k): $278,371
Roth IRA: $42,942
Nonretirement savings/investments: $5,000 (as I said, the move killed my savings)
Other than 401(k) contributions, my monthly savings are negligible at the moment because I'm still adjusting from the move and trying to sort out a new budget, which is where my question comes in--
Without making any major adjustments to budget, I have about $20,000 per year not earmarked for spending.
I'm inclined to put a lot of extra money toward the mortgage payment and more gradually rebuild my savings. This is mainly because mentally I have a hard time with the fact that I'm paying way more in interest than in principal and I hate paying PMI. But, I suspect I might be better off by aggressively rebuilding my savings. I just really hate seeing that huge mortgage balance.
What would you advise--extra mortgage payments or savings?
Hello and question
Re: Hello and question
You don't mention the interest rate on your mortgage nor the savings/investment vehicle you'd use for "savings". That said, as someone who is single, you really need a higher amount set aside in liquid savings. I'd want at least $10,000 in fairly liquid savings.
You could always withdraw your Roth IRA contributions (assuming you meet the 5 year rule), so you could consider that money as part of your long-term emergency savings. But having some other long-term savings, such as taxable investment accounts, would be a good idea.
Your 401k and Roth IRA balances look healthy. Does your plan include maxing out contributions on those?
Assuming your mortgage is at, or close, to the currently low rates, there really isn't any pressing reason to tie your cash up in equity. Yes, PMI is a pain. Maybe pay a bit extra here and there towards the mortgage when you have OT pay or tax refund money, if that makes you feel better. But having some liquidity in case of emergency (prolonged illness, for instance) will give you more stability.
You could always withdraw your Roth IRA contributions (assuming you meet the 5 year rule), so you could consider that money as part of your long-term emergency savings. But having some other long-term savings, such as taxable investment accounts, would be a good idea.
Your 401k and Roth IRA balances look healthy. Does your plan include maxing out contributions on those?
Assuming your mortgage is at, or close, to the currently low rates, there really isn't any pressing reason to tie your cash up in equity. Yes, PMI is a pain. Maybe pay a bit extra here and there towards the mortgage when you have OT pay or tax refund money, if that makes you feel better. But having some liquidity in case of emergency (prolonged illness, for instance) will give you more stability.
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Re: Hello and question
PMI is wasted money, much more so than interest. Pay down the mortgage principle so you can ditch the PMI (though put at least $300/mo into savings). Once PMI is gone, then go back to building up savings/investments.
Re: Hello and question
In the largest city in the state there were no acceptable rentals that accepted pets?... Anyway, George is absolutely right, PMI is a totally unnecessary expense. I’d calculate which is a better return; reducing mortgage or paying off student loans.
Monthly expenses $1,450/mo. Can you break these up? They are considerable.
Non-monthly $1,250/mo… You have some categories here, but any additional information as to where the bulk of this goes?
Monthly expenses $1,450/mo. Can you break these up? They are considerable.
Non-monthly $1,250/mo… You have some categories here, but any additional information as to where the bulk of this goes?