Thanks for the replies. I do realize the situation is more complex than just student loans vs. mortgage, so thanks for your input. I didn't mean to make our situation seem so dire.
Current E-Fund is $10k, between 3.5 and 4 months expenses. We're pretty comfortable with this number.
"Extra" money each month that goes into savings or debt prepayment ranges from $1000 to $1500 (my side income as a musician is variable). Typically, we have been doing:
- $500/m towards debt prepayment (or now, savings). Currently $4000 extra banked on top of $10k E-Fund.
- $600/m savings for our next vehicle purchase (which will ONLY happen when need be. We hope to get about 2 more years out of one vehicle and 7 more or so out of the other (both at a minimum). The reason we were setting aside this much for our next car purchase is to build it up somewhat quickly. Currently it stands at only $2400 since we bought my wife's Civic late last year.
- $200/m for things that need to be done around the house (gutters, etc). Current balance is just $200. Recently we had to tap this savings account to redo our shower and fix some old water damage behind the crappy old tile. Spent about $1200 or so for this.
- $100/m in a vacation fund that we tap into annually. If extra expenses come up or my varying income is on the low side for a month, vacation and home improvement savings are the first (and typically, the only) places we have to reduce savings that month. Current balance is $0...we leave for our anniversary vacation tomorrow morning.
* Also keep in mind all of our savings is only earmarked
for these things; we can always adjust on the fly and use all of it as an E-Fund if a serious situation arose.
Income wise, I'm the primary earner in our family at ~$64k (plus variable income on the side...maybe $12k or so). Wife makes around $22k a year in a retail job. Our monthly income loss will be $1300 or so (her current take home) at the most if she quits work altogether, which she doesn't expect or want to do. She wants to continue working a couple days a week if possible. But with a new baby.....we'll have to see on that. We do have access to free daycare (Grandma can't wait
) so I think wife working a day or 2 a week is pretty reasonable to count on. I said 'significant' income reduction, but I don't expect to have a serious shortfall even if she quits working altogether since her income essentially equates to our "extra" money each month. Our shortfall will come in the way of not being able to continue to put as many dollars toward paying extra on debt and saving for things like vehicles, house stuff, and vacations.
Roth balance is large enough that about $15k could (at absolute last resort) be tapped to pay down student loans if rates really spiked high.
We are able to deduct the student loan interest. For the past 3 years (since we got married) we get more from the standard deductions than itemizing and taking mortgage interest deductions. Filing for 2013 may be different as we have quite a few charitable donations to add to the mix which should take itemizing slightly above the standard deduction.