Hey everyone,
I am hoping to get some sage advice from the group. I am thinking about refinancing our mortgage, but going from a 10 year loan to a 25 year or 30 year loan to create extra cash flow so we can increase our savings rate and reach FI quicker. At the same time, I like the idea of paying off our mortgage in a few years. Although I do not think this is our forever home. I would like to move in the future. That move would either be to a better school district and/or we might move back to our home state to take care of our elderly parents.
Another wrinkle to add is that we don't have children yet, but we are in the process of private domestic adoption. I have the money set aside for the adoption (30k) but there might be additional expenses when that kid comes along (child care).
I also would like to know how you think we are doing. I know there is a LOT to improve upon. We need to tighten our budget in spots (and I appreciate some thoughts on that as well). Are we on track for FI within 10 years? Am I nuts to think so?
Here are some numbers:
Income:
Mine--90k (81k base salary and extra duties add about 9k)
Wife--45k
We save about 30k a year for investments. I am mandated to contribute 10% of my salary to a 401a (4.3% match), I max out a 403b, and my wife just started contributing at 10% of her salary (no match).
Assets:
401a--$224k
403b #1--136k
403b #2--$300 (she just started like last month)
Roth IRA--$40k
IRA--$5k
House--$260k
Savings--$32k (includes money for adoption)
Liabilities:
Mortgage--126k (2.875% interest rate--9 years left)
Home Equity Loan--$29,500 (4.125% interest rate--10 years left)
Student Loan #1--$57k (4.5% interest rate)
Student Loan #2--184k (6% interest rate)
*We are on the public service loan forgiveness plan (PSLF). Student loans forgiven for me in 2 years and 5 for my wife.
Monthly Income $7000
Monthly Budget:
Mortgage--$1300
Home Equity Loan--$350
Student Loan #1--$363
Student Loan #2--$999
Property Taxes--$305
Car Insurance--$175
Home Owners Insurance--$100
Pets--$125
Utilities--$350
Cable/Internet--$175
Netflix--$10
Gym--$21
Phone--$190 (we are leasing our phones...I know stupid)
Car Repairs/Maintenance--$200
Home Repair/Maintenance--$200
Gas--$350 (we both have 45 minute commutes each day)
Healthcare--$200 (medications and copays)
Food--$1200 (yes BIG face punch here....it used to be $1500 per month...trying to down further)
Total: $6413
That gives us about $500 extra each month.
So I guess I am wondering what your advice would be about the home refinance and how you think we are doing. If I were to refinance I can get a 4.5% interest rate at my credit union with no closing costs. I hate to give up 2.875%, but it would consolidate our loans and reduce our payment from $2100 a month or so to about $1300. That gives us $800 more per month to put into investments.
Also, I know for FI we are pretty far behind compared to others. I am wondering if you think it is possible for us to be FI in 10 years (my number is $1.25 million, but I was also anticipating our home being paid off and about $4k in expenses when the student loans and mortgage were taken out). I am not necessarily anticipating quitting my job when I hit FI. I enjoy it too much AND I receive a lot of fringe benefits (e.g. travel paid for to conferences...we make a mini vacation out of it and/or when I take students abroad).
I also know that we have to tighten our budget, particularly our food budget. We should be face punched for that.
Any advice is helpful and thanks ahead of time.