Hey Everyone,
I posted on here a couple of days ago about the pros and cons of paying off my mortgage and got some great responses and have also been reading through a bunch of other posts for the past few weeks. So now I'd like to give a big picture of where I'm at and also ask for some advice for the future.
I graduated and got married in July. We had about 15k between us starting off and about 25k in debt. We bought a house in October for $169k and put 5% down. The down payment and closing costs along with buying everything to start a new home (I would do things differently looking back, but that's neither here nor there) ate up most of our savings. I know people debate on the benefits of home ownership on here, but it was the right decision for us. I HATED living in an apartment as I'd never done it before (lived with parents during college to save money) and since we were living in a fancy apartment close to downtown Charlotte, we reduced our monthly spend by $400. I also see this property as a good rental property if we were to move because it's less than a 10 min drive to downtown and in an up and coming neighborhood. I took a little bit higher interest rate (4.875%) to avoid PMI, and plan to refinance if the rates are still low once we get to 80% LTV. We currently have about 5K in cash, down to 15k in debt which I plan on paying off by the December if everything goes as planned.
The wife and I currently have a gross income of about 91k. This will increase steadily (avg 10% every year) for a while depending on where I'm working, but I'm a CPA doing IT Audit so thankfully the job prospects are good.
After tracking spending the first 3 months of the year (which were ridiculous), I thankfully found this site and got down to business in making a real budget. Thankfully I'm not super materialistic and already pretty practical (both cars are paid off, reluctant to purchase new clothing, take lunch every day and eat out rarely, etc...), so making a much tighter budget wasn't that difficult. I just wasn't paying much attention to how much we were spending each month.
I've gotten it down to these expenses every month:
Groceries: $275 - $300
Insurance (Home/Car) - ~$75 (I pay in 6 month chunks)
Gas - $80-$100 (depending on my client, the wife and I carpool a lot and our commute is only about 10-15 min)
Utilities (Water, Trash, Power, Gas, Alarm, and Internet) - ~$250-$300
Gym - $50 per month
Misc - ~ $300-$400
(This includes occasional eating out, clothing and supplies, home maintenance, travel, and gifts. I have these broken down into their own categories in my budget but this works as well for my purposes here. I created these categories to be more of an average. Some months will be way under and some will be over depending on travel, necessary purchases, etc... )
Tithes - Roughly $750 right now
Mortgage - $1250 (minimum pmt is about $1000)
Total - ~$2850 -$3000
Current take home pay is roughly $5500 after all deductions.
I currently am only contributing 6% of my income every month to my 401k just to get the employer match and my wife is not eligible to start in her employer's 401k program until August.
The plan is to pay off the $15000 in student loans (interest rates vary from 4-6%) by the end of the year by paying about $2k per month towards them. My biggest question is what is the best plan of attack after we pay off the loans?
With raises this year, we will be around 6K take home by the end of the year which will leave us 3K every month for saving. Should we max out both of 401k contributions starting in January? This wouldn't leave us much wiggle room to build an emergency fund or anything like that. But my thought was to max them out for the next 3 years, which would put us at about 130K including our employer matches, then let it grow for the next 30 years, since I'll be 30 at the end of the 3 years. After that, reduce my contributions to the point of getting the employer match and put everything else in index funds. Also, how could I incorporate paying down the mortgage more quickly into all of this? I know a lot of it comes down to personal preference but I'd like to pay the mortgage off in 10 years or so. Just trying to find the right balance!
Thanks in advance for the help!