I’m very close to paying off the mortgage. It could be all done by the end of the summer.
For a few months, I will probably be topping off the savings accounts, refilling what was withdrawn to pay off the mortgage. But after that, a significant portion of my paycheck will be newly available for spending.
Which leads to the question: what I will do with the extra money I have each month?
This is probably my last chance to get a significant raise in my disposable income, so I don’t really want to screw this up by spending it thoughtlessly.
Hard core savings
If I want to retire early (or earlier), the answer would be to invest the entire surplus. This would help advance the early retirement plan by (1) keeping spending low, which would mean retirement budget could be smaller and (2) saving and investing more money, which would make my nest egg grow faster.
reduced hours
Or, if work becomes too onerous, I could use the surplus in the budget to buy back my time. I could probably cut back by another 0.1 FTE (or 10%) without much difficulty once the mortgage payment is gone.
Right now, the workload is manageable, and I don’t think I want to cut back further. So that means I’ll plan to keep my paycheck the same, for now.
one time purchases
There are a number of expenditures we’ve put on hold, partly to be able to pay off the mortgage, and partly because they are will be time consuming to complete. Each is a one-time purchase, but once I start adding up the entire list, the total looks very expensive:
- a new cell phone for the husband (his is 10 years old).
- new carpeting (it was already old when we moved into the house).
- painting the upstairs (last done by the prior owner).
- replacing the refrigerator, oven, and a toilet; all of which have had issues over the past several years, but which have limped along with repairs.
- the central AC will eventually need to be replaced. I’m pretty sure if it were a human, it would be of voting age.
I am feeling a bit antsy to get several of these done, since we’ve put them off for a number of years already. However, I am a little worried I might go crazy and try to take care of them all–that would be quite the mistake, as I think we’d be looking at several years of mortgage payments to clear the whole list.
Recurring costs
We could also spend that extra money in ways that would clearly lead to an increase in our cost of living:
- putting aside more money each month into 529 plans for the niece/nephews.
- hiring a cleaning person (or cleaning service).
- piano lessons.
- I’m pretty sure there’s more on my wish list, but my stingy subconscious is probably suppressing it.
Compromise
In the end, I’m pretty sure that the correct answer is to do a little bit of everything: save more and invest it; take care of a few purchases which we have put off; and use a little each month to make our lives happier.
The trick will be to pick the right proportions.
For now, this is all theoretical. But I will have to figure out a plan in the coming months. Otherwise, I foresee the awful question: where did all that money go?
What would you do? Have you had a similar situation when you paid off debt?