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Mulling over budget while I wait

May 28th, 2014 at 04:54 pm

Still waiting to hear back from the mortgage broker about whether or not we can be preapproved. Meanwhile, I thought I'd take a real look at a basic budget for us and see what our surplus or shortfall is each month.

The basic budget includes debt payments, condo dues, daycare, cable & cellphones, groceries, car share, and NT's tuition.

June surplus: $2482.78
July surplus: $2085.47
August surplus: $2630.21
September surplus: $2865.21
October surplus: $4831.88
November surplus: $4928.54
December surplus: $4920.21
January (and after) avg. surplus: $5592.18

So it's pretty much like I thought. If we could keep new housing costs to $2000 per month and started paying the mortgage in August, then August and September would be very tight. (Like, we'd struggle if one of us lost a job.) But starting in October it would get progressively less tight. At that point one of us actually could lose a job and we could continue to pay all the bills (including both mortgages).

So if (worst case scenario) we didn't get the WV money, we didn't sell the condo, we didn't get raises and one of us lost our job and couldn't get another one right away, we could still survive indefinitely.

That's good to know! All four of those are unlikely but possible, so it's best to be sure. We still need to see what the real mortgage payment would be, and I've got calls in to the utility companies to figure out what the energy costs would be, to make sure the $2000 number is realistic.

5 Responses to “Mulling over budget while I wait”

  1. Another Reader Says:
    1401296367

    It's good that you took a hard look at this. One thing you may not have considered is repairs and maintenance on this property. Unlike your condo, where the HOA takes care of the bulk of the repairs and maintenance, a 100 year old structure will require you to spend money on it. Using the listing as an example, it has a new roof and one new boiler. That's good, because you won't have to take care of those items today. However, over time you can expect to pay two to three percent of the property value every year in repairs, maintenance and capital improvements. How will you handle this? Will you set up a reserve account? Are you going to try to cash flow as things come up? Will you find yourself looking for a zero percent credit card when something major comes up?

    The other thing that would concern me if I were in your shoes is the state of your retirement savings. IIRC, saving for retirement is part of your "big" big picture. However, you are all at or near the 40 year mark. If you don't start investing for retirement today, you will lose the power of compounding. I would re-work my budget with each person investing a minimum of 15 percent of income into 401k's/403b's/IRA's etc. That's the minimum I would feel comfortable investing for retirement if I were 40. Ask yourself, what can we afford if we prioritized saving for retirement over the house?

    Finally, the education of your kids has to be considered. Will they go to public schools? How will they pay for college? You may be expected to come up with a large percentage of the cost at a time when you desperately need to fund your retirements. Currently, your retirement accounts are not considered in the financial aid calculation. For me, it would be a financially prudent decision to minimize my contribution to college costs and maximize the financial aid. You can borrow and get scholarships for college. There are no scholarships for retirement.

    You have done an amazing job of paying off a boatload of consumer and student loan debt on modest incomes. However, having to point the income hose at that fire has put you way behind where you need to be in other areas. In your shoes, I would think long and hard before I sunk all my savings into a house. A property that I would have to stretch to purchase and would consume a huge percentage of my income would not be my choice.

  2. creditcardfree Says:
    1401297917

    After reading Another Readers comments, I'm not clear about your savings. Are you using ALL your savings towards the down payment? Meaning you will start with zero in savings? If this is the case, I would suggest backing off from this particular house entirely. That is too big of a risk and could undermine all the work you have done to get where you are today.

  3. Another Reader Says:
    1401299454

    CCF:

    The last post states they will put $15k on a zero percent interest credit card to fund the condo renovations. And they borrowed $5,000 from their friends/future tenants to have the 10 percent down payment sitting in their accounts. My view is the same as yours. I would not consider doing this for one second if I were in their shoes.

  4. Another Reader Says:
    1401325600

    My plan in your shoes would delay buying a house until some other goals were met.

    First, I would allocate the $75k if and when it comes in as follows, based on the numbers in your sidebar.

    $11,000 Pay off remaining student loans
    $5,000 Rebuild medical EF
    $15,000 Rebuild primary emergency fund
    $6,470 Pay the remaining tuition for NT

    $37,470 total

    Then I would fully fund three 2014 IRA's at $5,500 each.

    $37,470+
    $16,500

    $53,970 total

    Wow! No more debt, no more tuition, and fully funded emergency funds and IRA's!

    Then I would fund the condo renovation at $13,500
    $53,970+
    $13,500

    $67,470 Total

    The remaining $7,500 would go into additional reserves, as you mentioned AS' job is winding down, or into the house fund.

    I know you badly want to make a donation to counter the damage the easement will cause. I would delay doing that and cash flow it after everything else is settled. Donating up front delays your house purchase and jeopardizes your retirement contributions. For me, my family's security and stability would come first. Once settled, I would budget a substantial monthly donation that would add up to the total I wanted to give.

    At this point you will have paid off all the debt and prepared the condo for sale. I would point the income fire hose at saving for the house. By the fall, you should be socking away tons of cash. I would also up the workplace retirement contributions and cover the 2015 IRA contributions as early as possible next year. By the home buying season next year, you should be in a position to make a solid down payment while keeping reserves to cover repairs, a vacancy, or a job loss.

    If the $75k does not come in, I would expect home buying to be delayed at least a year or two. I would pay off all the debt, finish the tuition, replenish the emergency funds, and fund IRA's. Leftover cash flow would go to the house fund.

    I know you have house fever and you are trying to force this to work, but in my view, everything has to go right to make it work. For me, there are too many uncertainties, and too many things that could easily go wrong to buy a house today. You were stressed and unhappy when you realized what a pickle you were in seven years ago. I would not risk going even part of the way back there again for the sake of buying a house.

  5. ND CHIC Says:
    1401326926

    If you get a conventional loan, you will need six months reserves for both properties or $27,300. I think you should sell your condo first.

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