Author Topic: At a tipping point... need some MMM advice  (Read 8568 times)

Easye418

  • Bristles
  • ***
  • Posts: 498
At a tipping point... need some MMM advice
« on: August 04, 2015, 08:51:29 AM »
All,

Two months ago:

Mortgage   $308,950
Student Loans   $65,000
Debt 1   $974.02
Debt 2   $2,982.55
Debt 3   $9,000.00
Debt 4   $1,473.00
Debt 5   $2,234.74
Debt 6   $536.00
Debt 7   $4,513.18
Debt 8   $1,000.00

Today:

Mortgage   $308,950
Student Loans   $65,000
Debt 1   $0
Debt 2   $0
Debt 3   $0
Debt 4   $0
Debt 5   $0
Debt 6   $0
Debt 7   $0
Debt 8   $0
*Mortgage and Student Loan values changed, just constant for sake of example.

Take that debt!  8-)

Here is my situation:

1.  Salary $117k (Dual income (60/40 me/her, 25% Fed, no State)
2.  Retirement: $84k (Vanguard Lazy 3), $14k tIRA (JPM, moving over soon), 401k my work 6% contrib, 3% employer match (max).
3.  Age: 26 and 25.  Would like to begin trying in 12 months for child(ren).
4.  I have a few thousand in Physical Assets in process of selling (sub $10k) and have side income of $6-$10k a year (take home)
5.  I am MBA.  Wife is OR Nurse.
6.  No true E Fund, using the IRAs as a parachute in dire emergencies (I wouldn't want too)


Optimally:  I would love to let my wife stay home with child(ren) without having too much financial stress on my shoulders.  Also retiring before I am dead.

Reality:  Wife works 2 12hr days, stays home 3 with child(ren) if the financials work out with day care/family.  She won't work weekends as that would be our family time. 

Since I cleared all of this debt, I am at a tipping point to focus in our my goals at hand.  From what I can see, I have a few routes I can go:

1.  Pay Student Loans off aggressively.
2.  Pay Principal aggressively off my Mortgage then no-cost refi to drop my payment. 
3.  Start raising 401k contribution.
4.  Create an actual Emergency Fund. 
5.  Mixture of 1-4.

Thanks MMM.


 

velocistar237

  • Handlebar Stache
  • *****
  • Posts: 1422
  • Location: Metro Boston
Re: At a tipping point... need some MMM advice
« Reply #1 on: August 04, 2015, 09:11:03 AM »
Rates on the loans? PMI on the mortgage?

Are you getting your employer 401k match already? Do I understand correctly that the match is 1:1 up to 3%?

MetalCap

  • Stubble
  • **
  • Posts: 118
  • Location: Washington DC
Re: At a tipping point... need some MMM advice
« Reply #2 on: August 04, 2015, 09:12:37 AM »
A couple quick thoughts:

  • Look at your taxes and see if it's beneficial to raise your 401k level now to get down to a lower bracket.  If not save this for a few steps later.
  • Build up an emergency fund, this is critical to protect youself and the kids if either of you lose your job. It will also make the transition easier if/when one of you moves to stay at home.
  • You/We need your % for loans and mortgage to decide what to do next.  I used to have 6 & 8% SL but refi'd to SOFI down to 3% and will have it paid off this year.  I also refi'd the house to eliminate PMI.  After eliminating PMI, if the rate is 4% ish it will be better to max the 401k assuming you're not underwater on the home.  If underwater get that right side up.

Congrats on the good work.  Keep it up.  If you guys start getting burned out maybe see if she can drop one shift.  Keep it up!

Cheddar Stacker

  • Magnum Stache
  • ******
  • Posts: 3719
  • Age: 41
  • Location: USA
Re: At a tipping point... need some MMM advice
« Reply #3 on: August 04, 2015, 09:17:43 AM »
Welcome to the forum.

Yeah we need to know the interest rates to give you a good answer. Also, what's your house worth? Can you consider selling that and finding something cheaper, or is this cheap for your area? That's a big mortgage to try to pay down.

In the 25% bracket, without any further information on the interest rates, I'd recommend maxing out your 401ks and Traditional IRA's to get down into the 15% bracket.

I wouldn't worry about an EFund. Using the IRA can work, so can a HELOC.

This is from a year ago, but it shows you some of the things to think about, and gives you an idea how diverse this community is on this issue.

http://forum.mrmoneymustache.com/ask-a-mustachian/let's-settle-this-with-a-vote-invest-or-payoff-debts/

Easye418

  • Bristles
  • ***
  • Posts: 498
Re: At a tipping point... need some MMM advice
« Reply #4 on: August 04, 2015, 11:03:29 AM »
Rates on the loans? PMI on the mortgage?

Are you getting your employer 401k match already? Do I understand correctly that the match is 1:1 up to 3%?


A couple quick thoughts:

  • Look at your taxes and see if it's beneficial to raise your 401k level now to get down to a lower bracket.  If not save this for a few steps later.
  • Build up an emergency fund, this is critical to protect youself and the kids if either of you lose your job. It will also make the transition easier if/when one of you moves to stay at home.
  • You/We need your % for loans and mortgage to decide what to do next.  I used to have 6 & 8% SL but refi'd to SOFI down to 3% and will have it paid off this year.  I also refi'd the house to eliminate PMI.  After eliminating PMI, if the rate is 4% ish it will be better to max the 401k assuming you're not underwater on the home.  If underwater get that right side up.

Congrats on the good work.  Keep it up.  If you guys start getting burned out maybe see if she can drop one shift.  Keep it up!

Welcome to the forum.

Yeah we need to know the interest rates to give you a good answer. Also, what's your house worth? Can you consider selling that and finding something cheaper, or is this cheap for your area? That's a big mortgage to try to pay down.

In the 25% bracket, without any further information on the interest rates, I'd recommend maxing out your 401ks and Traditional IRA's to get down into the 15% bracket.

I wouldn't worry about an EFund. Using the IRA can work, so can a HELOC.

This is from a year ago, but it shows you some of the things to think about, and gives you an idea how diverse this community is on this issue.

http://forum.mrmoneymustache.com/ask-a-mustachian/let's-settle-this-with-a-vote-invest-or-payoff-debts/



                            Amount   Monthly Payment   Rate   
Student Loan 1    $4,058.47     $50.93    4.25%   My Loan
Student Loan 2    $2,247.57     $27.01    3.15%   My Loan
Student Loan 3    $9,204.32     $113.12    5.16%   My Loan
Student Loan 4    $543.42    0                    6.80%   My Loan
Student Loan 5    $536.24    0                    6.80%   My Loan
            
            
Student Loan 6    $7,213.63    0   6.80%   Her Loan
Student Loan 7    $7,549.26    0   6.80%   Her Loan
Student Loan 8    $3,649.39    0   6.80%   Her Loan
Student Loan 9    $2,794.81    0   4.50%   Her Loan
Student Loan 10    $3,218.01    0   3.40%   Her Loan
Student Loan 11    $1,229.63    0   6.80%   Her Loan
Student Loan 12    $3,526.60    0   6.80%   Her Loan
Student Loan 13    $3,257.13    0   6.80%   Her Loan
Student Loan 14    $5,500.00    0   4.66%   Her Loan
Student Loan 15    $7,000.00    0   4.66%   Her Loan
Student Loan 16   TBD                   0   4.66%   Her Loan

*Student Loan 16 is the final one.  No additional loans....EVER.
            
Total    $61,528.48          


Home could be sold today ~$375K.  Paid $331K Sept 2014.  DFW Area.

Since I am the only one with a Graduate level degree (MBA), I assume I can only re-fi my student loans via SOFI.  However, I only make up $16k, not sure its worth it.

I am maxing employer contribution already.  They do 6% (50c:$1) so 6% plus 3% from them.

Thanks for intial feedback!
« Last Edit: August 04, 2015, 11:19:05 AM by Easye418 »

Cheddar Stacker

  • Magnum Stache
  • ******
  • Posts: 3719
  • Age: 41
  • Location: USA
Re: At a tipping point... need some MMM advice
« Reply #5 on: August 04, 2015, 11:17:15 AM »
I would try to refi all of the 6.8% loans. If you can't refi those, make paying them off your highest priority after maxing out your 401k match potential.

All the other rates I could live with if I had to, but I would try to just refinance the whole bundle into one loan at a low rate. If you can pull that off I would max out the 401K and Traditional IRAs

Easye418

  • Bristles
  • ***
  • Posts: 498
Re: At a tipping point... need some MMM advice
« Reply #6 on: August 04, 2015, 11:25:19 AM »
I would try to refi all of the 6.8% loans. If you can't refi those, make paying them off your highest priority after maxing out your 401k match potential.

All the other rates I could live with if I had to, but I would try to just refinance the whole bundle into one loan at a low rate. If you can pull that off I would max out the 401K and Traditional IRAs

Can I re-fi my wife's payments to really low tho?  She is only a BSN (or will be). 

SOFI doesn't look like their rates are that much lower anyways.

dragoncar

  • Walrus Stache
  • *******
  • Posts: 9222
  • Registered member
Re: At a tipping point... need some MMM advice
« Reply #7 on: August 04, 2015, 11:26:01 AM »
Am I right in assuming you itemize and therefore can discount mortgage and student loan interest at your marginal rate?  Or maybe you are out of the student loan deduction phaseout already?  Not up on tax law.  I agree with trying to refi, but if tax deductible the rates don't seem too terrible.  I'd establish a good efund before aggressively paying off deductible student loans

Easye418

  • Bristles
  • ***
  • Posts: 498
Re: At a tipping point... need some MMM advice
« Reply #8 on: August 04, 2015, 11:28:03 AM »
Am I right in assuming you itemize and therefore can discount mortgage and student loan interest at your marginal rate?  Or maybe you are out of the student loan deduction phaseout already?  Not up on tax law.  I agree with trying to refi, but if tax deductible the rates don't seem too terrible.  I'd establish a good efund before aggressively paying off deductible student loans

As for the tax questions, no clue.

Whats a good efund amount?

Its apparent that the Mortgage is weighing us down big time.  If possible, I am hoping to sell next September (avoid Capital Gain tax) for hopefully $400k-$415k if lucky.  Downsize to a $250K-$300K house using all the gains and equity we have built into this one.  It is a long shot though.
« Last Edit: August 04, 2015, 11:33:22 AM by Easye418 »

Guesl982374

  • Bristles
  • ***
  • Posts: 499
Re: At a tipping point... need some MMM advice
« Reply #9 on: August 04, 2015, 11:37:35 AM »
First off, great job the past two months. Take a moment to reflect on what you've been able to do as not many people would have been able to accomplish that task.

I would...
a) Make sure I got my employer 401K match
b) Then, Kill the student debt as most of it is above 4/5%
c) Then, Fund a couple months emergency fund (increase to 4-6 months once shes pregnant/getting ready to leave work)
d) Then, Max retirement accounts
e) Then, determine where I personally (emotionally) stand on the pay off mortgage early vs. invest while paying the mortgage over 30 years

Given you paid off $23K+ of CC debt in 2 months, I assume you could get through "a" through "d" in under a year or two ahead of your baby timeline. Paying off the student loans should give you some space to reduce income.

With that being said, 60% of $117K = $70K your pay vs. $375K house it sounds like you might have a housing cost issue if you both want your wife to stay at home. To put it in perspective, many on this board buy houses between 1x (LCOL) to 3x (HCOL) their salary. You would be above 5X if you're wife stayed at home.

http://www.mymoneyblog.com/4-different-rules-of-thumb-for-how-much-house-you-can-afford.html

Remember, housing is typically your biggest cost and it sounds like you might be overspending in that area. Something to think about.

dragoncar

  • Walrus Stache
  • *******
  • Posts: 9222
  • Registered member
Re: At a tipping point... need some MMM advice
« Reply #10 on: August 04, 2015, 11:41:58 AM »
Am I right in assuming you itemize and therefore can discount mortgage and student loan interest at your marginal rate?  Or maybe you are out of the student loan deduction phaseout already?  Not up on tax law.  I agree with trying to refi, but if tax deductible the rates don't seem too terrible.  I'd establish a good efund before aggressively paying off deductible student loans

As for the tax questions, no clue.

Whats a good efund amount?

Its apparent that the Mortgage is weighing us down big time.  If possible, I am hoping to sell next September (avoid Capital Gain tax) for hopefully $400k-$415k if lucky.  Downsize to a $250K-$300K house using all the gains and equity we have built into this one.  It is a long shot though.

No clue, meaning you don't know if you itemize?

A efund size is 6 months expenses, but everyone will have a different opinion.  What's your monthly spend?  For example, if you can survive on only one income, that implies less risk and you can have a smaller efund.  Some would also suggest 6 months bare minimum spend vs. your typical spend (assuming you will cut way back in an emergency). 

Depending on how little you spend, 6 months may not be enough.  It should also be big enough to cover any one of the "typical emergencies" (those that you can't predict, but are likely to happen once every few years) like medical expenses from a broken bone, a new transmission in your car, plumbing repairs for a broken pipe, etc.

I believe MMM has even argued against an efund, using "springy debt" to cover the above.  I'm not a fan of this, since access to credit often disappears in crises
« Last Edit: August 04, 2015, 11:46:46 AM by dragoncar »

Easye418

  • Bristles
  • ***
  • Posts: 498
Re: At a tipping point... need some MMM advice
« Reply #11 on: August 04, 2015, 11:55:10 AM »
First off, great job the past two months. Take a moment to reflect on what you've been able to do as not many people would have been able to accomplish that task.

I would...
a) Make sure I got my employer 401K match
b) Then, Kill the student debt as most of it is above 4/5%
c) Then, Fund a couple months emergency fund (increase to 4-6 months once shes pregnant/getting ready to leave work)
d) Then, Max retirement accounts
e) Then, determine where I personally (emotionally) stand on the pay off mortgage early vs. invest while paying the mortgage over 30 years

Given you paid off $23K+ of CC debt in 2 months, I assume you could get through "a" through "d" in under a year or two ahead of your baby timeline. Paying off the student loans should give you some space to reduce income.

With that being said, 60% of $117K = $70K your pay vs. $375K house it sounds like you might have a housing cost issue if you both want your wife to stay at home. To put it in perspective, many on this board buy houses between 1x (LCOL) to 3x (HCOL) their salary. You would be above 5X if you're wife stayed at home.

http://www.mymoneyblog.com/4-different-rules-of-thumb-for-how-much-house-you-can-afford.html

Remember, housing is typically your biggest cost and it sounds like you might be overspending in that area. Something to think about.

Thanks.  Yep on the housing situation.  Pricey market out here though.

The A through E is what I was kinda thinking.  I am literally cutting every optional expense I currently have to try to accomplish as much Student Loan destroying as I possible can within 12 months.

We were spending $300 a month on Tolls.  Started taking main roads for everything.  Shockingly, minimal difference in time.  That itself is going to help make a dent.

Ballpark, I think we bring home around $7,400 a month cash

$7,400
-$2,750 (Mortgage: Principal+Interest+PMI+Homeowner's Insurance+ Prop Tax)
-$560 (Gym,Car Insurance,Utilities,Internet,Cell phones, TV (for now)
-$500 (Gas and Food, Total Estimate)
$3,590 towards Student Loan a month.
=65/$3.5k = 18 months payoff

I know I am missing some big expenditure and will be like AHHH.
« Last Edit: August 04, 2015, 11:57:43 AM by Easye418 »

Cheddar Stacker

  • Magnum Stache
  • ******
  • Posts: 3719
  • Age: 41
  • Location: USA
Re: At a tipping point... need some MMM advice
« Reply #12 on: August 04, 2015, 11:57:43 AM »
As for the tax questions, no clue.

http://forum.mrmoneymustache.com/taxes/the-mustache-tax-guide-(u-s-version)/

With that mortgage and the real estate taxes you will pay, you likely have enough expenses to itemize. Your income is just low enough to deduct the SL interest.

I believe MMM has even argued against an efund, using "springy debt" to cover the above.  I'm not a fan of this, since access to credit often disappears in crises

I'm a big fan of this. I don't keep a designated EFund. I have a $40K HELOC, plus some taxable investments, plus a little bit kicking around in a checking account but that's it. I can also borrow up to $50K from my 401k. I also have a CC with 0% interest until March 2016, and can easily get another one if I need it, but I won't need it.

Neustache

  • Handlebar Stache
  • *****
  • Posts: 1196
Re: At a tipping point... need some MMM advice
« Reply #13 on: August 04, 2015, 12:28:20 PM »
How much is your PMI per month?  Is your mortgage conventional or FHA?

Easye418

  • Bristles
  • ***
  • Posts: 498
Re: At a tipping point... need some MMM advice
« Reply #14 on: August 04, 2015, 12:30:32 PM »
How much is your PMI per month?  Is your mortgage conventional or FHA?

$160 a month.  Conventional.

Also, if it makes any difference, I have not spent the $14k to pay off all the debts above.
« Last Edit: August 04, 2015, 12:44:05 PM by Easye418 »

Neustache

  • Handlebar Stache
  • *****
  • Posts: 1196
Re: At a tipping point... need some MMM advice
« Reply #15 on: August 04, 2015, 12:38:22 PM »
Sorry, one more question:  what was your original appraised value of your home when you bought it - to determine how much you need to pay down to get rid of PMI.

I'm not a big believer in huge EF's, but pregnancy is a whole other ball game.  Be financially ready if she ends up on bed rest for her entire pregnancy (happened to my friend...I was on bedrest 12 weeks, it happens!). 

Easye418

  • Bristles
  • ***
  • Posts: 498
Re: At a tipping point... need some MMM advice
« Reply #16 on: August 04, 2015, 12:49:52 PM »
Sorry, one more question:  what was your original appraised value of your home when you bought it - to determine how much you need to pay down to get rid of PMI.

I'm not a big believer in huge EF's, but pregnancy is a whole other ball game.  Be financially ready if she ends up on bed rest for her entire pregnancy (happened to my friend...I was on bedrest 12 weeks, it happens!).

Orig paid: $331k 
Orig Appraised: $339k

Duly noted about EF.

Why do you have 16 different student loans?  That must be a nightmare to pay them and do taxes.  I would try to consolidate those and/or pay them off quickly.

Pretty much, the wife went to a few different college programs. Assoc>RN>BSN

Taxes aren't that bad, since they are all at one company, they shoot me the one tax form.

Rosy

  • Handlebar Stache
  • *****
  • Posts: 2249
  • Location: Florida
Re: At a tipping point... need some MMM advice
« Reply #17 on: August 04, 2015, 01:32:17 PM »
I agree with the a thru e plan of attack.

On the EF - 6mo living expense is fine, but considering an upcoming pregnancy, I'd bolster that with at least another 3 mo - in case there is trouble with the pregnancy (could be an extended hospital stay for her or the baby or she might need bedrest before or ....).
Plus, I would add another $5000 cash for unexpected expenses like replacing AC or some other house related expense.
A triple threat - but, hey, better safe than sorry and it will give you some breathing room during the transition to stay at home mom.

Once you consolidated the 6.8% student loans into a lower rate you will have them paid off in no time and then it will be fun to see all the other student loans disappear - one by one, that is motivation and a good reason not to consolidate them all.

velocistar237

  • Handlebar Stache
  • *****
  • Posts: 1422
  • Location: Metro Boston
Re: At a tipping point... need some MMM advice
« Reply #18 on: August 04, 2015, 02:49:49 PM »
I would put getting rid of PMI at about the same level as the student loans if you decide to stay in your current house, maybe even at a higher priority. For example, when you get down to $20K left before PMI is removed, and you are paying $160/mo, then that's a 9.6% interest rate. That only goes up as you get closer to paying it off.

Easye418

  • Bristles
  • ***
  • Posts: 498
Re: At a tipping point... need some MMM advice
« Reply #19 on: August 04, 2015, 04:00:25 PM »
I would put getting rid of PMI at about the same level as the student loans if you decide to stay in your current house, maybe even at a higher priority. For example, when you get down to $20K left before PMI is removed, and you are paying $160/mo, then that's a 9.6% interest rate. That only goes up as you get closer to paying it off.

I guess the good thing is that I have 18-24 months of full income coming through the door. 

Not including a decent tax return that I can either throw towards the Prinicipal or Student Loans, merit increase, promotion, wife works 40 hours, etc.

So $65k to Student Loans then $40ish to Prinicipal to bring down the LTV to 80% = $105k in 18-24 months.  TIGHT.

Plan on trying next July so 12 months, tact on 9 months of pregnancy = 21 months.

Wonder if I should attack the 6.8% loans and 5.16% loan for $35K and switch to Mortgage and pound away at it.

Re-fi to a 30 year then lower the payments so my wife can stay at home for a bit....

So many possibilities.  Not to mention, I may have $5-$10k in assets I can liquidate still. Plus $6-$8k side income coming in 3 months.

BicycleB

  • Handlebar Stache
  • *****
  • Posts: 2267
  • Location: Live Music Capital of the World
  • Older than the internet, but not wiser... yet
Re: At a tipping point... need some MMM advice
« Reply #20 on: August 04, 2015, 04:21:04 PM »
Excellent comment by Velocistar.

Consider using a budget app like YNAB (You Need a Budget)  - with relatively little effort, you will get much more clarity about expenses.  Possibly this will identify some areas where a further cost cut can be done with little or no loss in quality of life.  The financial effect might be as large as the differences between the options being discussed.

Overall, great work in establishing your career, your marriage, a savings habit, and a plan.  Keep it up!

Neustache

  • Handlebar Stache
  • *****
  • Posts: 1196
Re: At a tipping point... need some MMM advice
« Reply #21 on: August 04, 2015, 05:01:24 PM »
When you pay down the mortgage, you can do a mortgage recast - it cost less than a refi but it takes into consideration the extra principle you've paid down and then recasts the mortgage to get a lower payment.  You'll want to call your mortgage company and see what they require.  Mine requires a 10K pay down to recast and a $250 fee.  A recast might be better, too, if your rate is better than what you could get by refinancing.  After seeing Velocistar's comment, I think you should pay down the mortgage to rid PMI, then attack those student loans.  You not only get the 9.6% return, but add to that the actual interest rate of your mortgage, and it is probably more like 11%-13% return (someone can correct me if I'm not thinking about this the right way). 

Also, make sure you shop around for homeowners insurance.  People tend to stick with the same place because it's easier, but you can usually save money on this by shopping around every year or two.  The companies don't like this, but I don't like the automatic increases they do, either. 

I'd definitely put getting rid of PMI somewhere before paying off those lower interest student loans.  Maybe  when you get to that step, some of the student loans first for cash flow, then PMI before you tackle the low interest student loans?


Easye418

  • Bristles
  • ***
  • Posts: 498
Re: At a tipping point... need some MMM advice
« Reply #22 on: August 04, 2015, 06:26:45 PM »
When you pay down the mortgage, you can do a mortgage recast - it cost less than a refi but it takes into consideration the extra principle you've paid down and then recasts the mortgage to get a lower payment.  You'll want to call your mortgage company and see what they require.  Mine requires a 10K pay down to recast and a $250 fee.  A recast might be better, too, if your rate is better than what you could get by refinancing.  After seeing Velocistar's comment, I think you should pay down the mortgage to rid PMI, then attack those student loans.  You not only get the 9.6% return, but add to that the actual interest rate of your mortgage, and it is probably more like 11%-13% return (someone can correct me if I'm not thinking about this the right way). 

Also, make sure you shop around for homeowners insurance.  People tend to stick with the same place because it's easier, but you can usually save money on this by shopping around every year or two.  The companies don't like this, but I don't like the automatic increases they do, either. 

I'd definitely put getting rid of PMI somewhere before paying off those lower interest student loans.  Maybe  when you get to that step, some of the student loans first for cash flow, then PMI before you tackle the low interest student loans?

Brilliant.  I will look into this mortgage recast.

I've come down to a conservative estimate of $3,000 "free" cash flow a month.

$1,200 needs to go to Student Loans. $934 is my wife paying me back until December (borrowed from myself). I owed $191 a month.

It would take $37,000 to get rid of PMI. Then I might be able to recast at $272,000.  $1,800 extra to Principal a month.

Hmmm... Given that information, what does everyone think!  So tough and I wish I can speed up everything.

Neustache

  • Handlebar Stache
  • *****
  • Posts: 1196
Re: At a tipping point... need some MMM advice
« Reply #23 on: August 04, 2015, 06:40:38 PM »
You will need to verify your mortgage company will do a recast...and when the recast, they only recast it for the length remaining on your term.  They won't re-amortize 30 years out, is what I'm trying to say.  Just wanted to be clear on that.  But it does help (in my view) when you have a situation like yours where you need to get rid of PMI and you want the cash flow that comes with a lower payment.

I hear you on wishing to speed everything up...but don't forget to enjoy life now!


Potterquilter

  • Stubble
  • **
  • Posts: 113
Re: At a tipping point... need some MMM advice
« Reply #24 on: August 04, 2015, 07:36:10 PM »
A piece of advice from an RN. Even if you can afford it, it might be smart for your wife to work as a nurse post kids. You lose skills quickly and if you were ever injured or laid off she could pick up the slack quickly. Ask me how I know that.

When my kids were little I did a lot of on call and agency work. One local nursing home used to call me and I would go in when DH got home from work a couple a days a week. We had no child care expenses. I had to work one weekend a month to get this gig but it was well worth it. It really helped us reach FI much earlier and DH bonded with the kids and I was able to contribute to the pot. A win win situation.  Once my kids were in high school I had a full time day job.  We were FI by that time but I was able to pay a lot of their college costs so they wouldn't have awful loans. DH also had a period of illness and I was so glad I had kept up my skills. He was able to return to work after a year but it was a scarey time.

Great advice otherwise on the mortgage and school loan vs. emergency fund payoff. You have done very well in a short time.

Easye418

  • Bristles
  • ***
  • Posts: 498
Re: At a tipping point... need some MMM advice
« Reply #25 on: August 05, 2015, 09:02:17 AM »
I would put getting rid of PMI at about the same level as the student loans if you decide to stay in your current house, maybe even at a higher priority. For example, when you get down to $20K left before PMI is removed, and you are paying $160/mo, then that's a 9.6% interest rate. That only goes up as you get closer to paying it off.

I definitely see the merit in increasing the 401k, but I don't think all the way to $1250.

If I increase my contributions from 6% to 15%, the true effect of my check will go down $263 or $526 a month. That means I will be banking $875 a month instead of $350 for a yearly (with employer 3%) ~$12,000 a year 401k. I will readjust as needed, but a good improvement from what I was doing before.

$3000-$526 = $2474.

$36,709.62 in 5.16%-6.8% interest rate student loans. Give me a payoff of 24 months, thats ~$1,500 a month to Student Loans.

That leaves $974 dollars to put towards an E-Fund/ Principal Mortgage Payment... This is the tricky one.

I can recast my mortgage if I save up say $30k to lighten the burden on my mortgage payment OR I can pay down principal in order to get rid of my PMI.

Thoughts?

Baron235

  • 5 O'Clock Shadow
  • *
  • Posts: 90
Re: At a tipping point... need some MMM advice
« Reply #26 on: August 05, 2015, 09:13:54 AM »
If you really want to make a difference and have some room, you need to get a much cheaper house.  If you don't, it will be tight.  All of your minor changes will help get you through a-d quicker, but if you really want security and path to a single family income the safest way would be a more affordable home.    Seems like there is a lot of option in the Dallas area for around $200, but I am not sure where you both work to really see about the commute. 

Easye418

  • Bristles
  • ***
  • Posts: 498
Re: At a tipping point... need some MMM advice
« Reply #27 on: August 05, 2015, 09:23:45 AM »
If you really want to make a difference and have some room, you need to get a much cheaper house.  If you don't, it will be tight.  All of your minor changes will help get you through a-d quicker, but if you really want security and path to a single family income the safest way would be a more affordable home.    Seems like there is a lot of option in the Dallas area for around $200, but I am not sure where you both work to really see about the commute.

Yeah,  definitely an option.  Again, need to hold at least until September 2016 in order to avoid Capital Gains Tax.  Would love to get a mid $200's mortgage.

Cheddar Stacker

  • Magnum Stache
  • ******
  • Posts: 3719
  • Age: 41
  • Location: USA
Re: At a tipping point... need some MMM advice
« Reply #28 on: August 05, 2015, 09:24:21 AM »
Easye418, bravo for coming here, asking questions, listening, and making some big changes. It's good to see. Sometimes these case studies are just full of excuses. You'll be done before you know it!