I'm still around, it's just been a little hectic.
The weather has been much more bearable around here. We came home Sunday reeking of garlic - think it's worn off by now.
Definitely had a spendy month, but was less expensive than I had expected. It's hard to care anyway, our savings is doing so well lately (knock on wood).
Thinking towards long-term goals lately. I am starting to think we will hit all our "long-term" goals in 2010. Go figure! It depends, but exciting all the same.
I think we will have $30k cash in the bank by next spring. IT's kind of an arbitrary number. It's well over 6 months of "minimal" spending, so certainly an ample emergency fund. The arbitrariness is that we haven't had that much cash since we had our first child. So, um, it FEELS good.
We will be in that range next spring when LM is done with preschool. We have had a few different ideas what to do with that preschool money - $150/month. BUT, we are also saving $250/month for our medical deductible fund, and knock on wood, really haven't used it. As of next summer I would be happy to divert $250+ $150 per month, which is enough to max out our second ROTH (by the following April - meaning we can max both for 2010). I know max may increase, but just one thing at a time here. Putting away $10k per year is more than sufficient! THat's like 12% of my income, on top of the 10% we already contribute to retirement. IT's just too good a tax vehicle to pass up though.
Basically, as long as we are healthy we can max out the second ROTH.
With that, we can still continue to add about $8k per year to cash (which may cover the medical part anyway). I would like to contribute at that level until we have $40k cash. Of course, once we get there, might want to go one more year to $50k. Will see.
Which leads us to our next decision. As our cash balance grows, what do we want to do with the excess?
On one-income, I vote mortgage payoff. I am quite sure long-term investing would easily trump the effective 3.5% interest rate on our mortgage (after tax savings, etc.). BUT, for now life is simple. All our savings is in tax-deferred accounts and cash accounts. Life is very simple. To add taxable investments to the equation just makes me cringe when I think of all the work involved of managing it, and managing the taxes, etc.
Quite simply, paying off the mortgage is easy. IT keeps our taxes very simple, etc. So that is where I lean. Dh probably wants to save more for college. So we have much to discuss there.
If he returns to work it will be a very different ballgame. Our tax bracket will increase drastically. We will probably fund 401ks, HSAs, and 529s instead, to lower our tax exposure. For now, the HSAs and 529s give us no tax benefit, are not very flexible, and cost more than other savings vehicles. For now, I am not offered a 401k. But all these vehicles will save us a lot of taxes if our income increases.
If dh wanted to match his parent's contributions at $2k per year to college - for the kids - I think it's about the most I would really want to set aside. I'd rather start chipping away at the mortgage with any extra cash.
Which means, by end of 2010 we will probably have an ample 6 months' emergency fund, will be maxing our ROTHs (for a total 22% gross to retirement), and saving 10% income to cash. May be funding college. Any windfall could go to the mortgage.
Why so much cash? I'd like $15k for catastrophic emergency (& growing), $20k to replace both cars, and about $10k for home maintenance. Those are all the minimums I Feel we need - though they can overlap a bit. If we use the emergency fund I would gladly buy an old clunker instead, etc. That adds up to about $45k, eh? We tend to hoard cash, but just haven't had the income to do so in a while. I think cash is under-rated for the most part. Has kept our life simple. Will probably keep hoarding cash until we have a years' worth take-home pay in the bank. I have no issue with this if we are maxing out our retirement vehicles. The thing about cash is we can always change our mind down the road (invest it, put a chunk to mortgage, spend it, whatever). & as long as dh is not working, and not terribly employable, I think cash is extra important. IT would be kind of moot if he were working - I wouldn't see the point of hoarding so much then. Interest rates suck now, and have most of our adulthood, but I have managed to earn 5-6% many years on our cash. That time will come again. (I have a 5.5% CD at current - it expires later this year).
All this is probably way optimistic, but the direction we are currently heading in.
The possibility of meeting all of our aggressive savings goals on one income, is very exciting. My last long-term goal of current is to pay off the mortgage by age 45. In like 12 years? I assume dh will return to work to help meet this goal. It still feels like a bit of a pipe dream otherwise. But, who knows.
Been a Little Busy
I'm still around, it's just been a little hectic.