When you buy your first house, there are many expenses to consider when making your budget: fluctuating utility bills and emergency repairs are likely the first things you think of. But something I haven’t considered since we bought our home last year is the increase in the escrow portion of our mortgage due to increasing city taxes. Taxes here in North Jersey are mind-boggling, particularly in our county.
While we were on vacation, one of the pieces of mail in the stack we came back to was a notice from our mortgage company, stating that our total mortgage payment would be increasing by $85 in order to accommodate the need for additional monies in our escrow account. (Our mortgage company pays the city tax and hazard insurance from our escrow).
In reality, the prorated escrow shortage is estimated to only be $46 per month, but the mortgage company wants $85 in order to maintain the “allowable low-point balance” in the account. So now I’ll have to take a look at our loose “budget” (we don’t follow a strict line-by-line formula) for the next 12 months to determine where that money is going to come from.
It also puts a crimp in my pay extra on the mortgage plan that I’ve been following the past year. Since Day 1, I’ve made an extra principal payment of $25 each month, and recently increased it to $50. It doesn’t sound like much, but if I keep it up, we’ll shave more than a year from our mortgage and save $15,000 in interest. Now, I’m not sure I can keep up that pace and still reach our short-term savings goals. Our cell phone bill is already as low as possible, the TV package is locked in for another year (and Mr. Saver would lose his mind if I cut any of the channels), and we’re already closely watching our utility usage. Our car insurance premium is excellent for Northern New Jersey, and we brown bag our lunches 95% of the time. Besides the vacation we just went on, we don’t spend much on entertainment and go out to eat maybe once a month. I’m couponing best I can with the groceries, but I think there’s room for improvement there. We did add a bit of a balance on one credit card after becoming debt-free (except for our 0% car loan and mortgage), but that was due to clothes shopping, $100 in baggage fees for our vacation ($25 each bag, each way) and a nice dinner. That will be paid off again in two months (I could do it in one fell swoop at the end of the month, but would rather spread it out to keep our checking account a little more liquid).
Tackling the New Mortgage Payment
Once I tally up our expenses, I’ll have a better idea of where we stand. We were thinking of upgrading our 2 1/2-year-old cell phones to smartphones (we can get two Droids from Verizon for $99), but that would require an additional $30 monthly data usage fee for each phone. So that might be put on hold, especially since I haven’t been doing much freelance work lately.
What I think I’ll do is round up our new mortgage payment to a nice, even number, which would still add $23/month in a principal payment and go from there. I don’t think we’ll miss it, and I can bump it back up to $50 extra in a few months if all goes according to plan. Raises at the end of the year would help, but I’m not holding my breath — while I’m happy to be gainfully employed, there’s been a two-year drought due to the economy. Mr. Saver has been getting what equals a cost-of-living raise, which is helpful.