Tuesday, April 24, 2007

thoughts on our financial situation

My wife and I have been reviewing our imminent financial situation.

As mentioned, we'll be moving to Chicago to a much more expensive house.
My wife will take a few months off before returning to work - one income for a while.

Understanding our pending finances is still a bit of a mystery:

* my wife's salary will be different after taxes
* we'll have substantial mortgage interest, which may increase our take home pay
* we'll have new expenses for the new house - the actuality of these expenses are tbd
* we'll have maintenance expenses for the old house - uncertain what that will be or how much matinenance costs will be

Our current house is on the market, but moving very slowly. I'm expecting the mortgage for the old house to eat substantially into our monthly savings.

The real challenge will be understanding our actual monthly net once tax adjustments and new living expenses are factored in.

I've set Quicken to enter repeating expenses (and placeholder expenses)for several months in advance, however, I'll need to wait a bit longer before I can see the actual cashflow impact of the new mortgage once my wife returns to work.

Later this month I'll request that our accountant analyze our tax situation to determine withholding adjustments. I assume both mortgages will be fully deductible, but I have a sneaking subscription there will be only a partial deduction.

With our significant tax obligations this year and the downpayment for the new home pending, I'm fairly uncomfortable with our diminished cash reserve. Once I have a better understanding of our monthly overhead I can calculate how long the new reserve will last.

With such uncertainty regarding our reserves, my wife and I have agreed to delay spending money decorating the new house. The most I expect is to install venetian blinds, if necessary.

I'm very tempted to install a computer network, however, I'll have to put it off until our cash situation is measurable and we're comfortable with it.

At this point, I'm fairly certain we're over-paying income tax. We should be able to reduce future withholdings to offset the over payment. I suppose we'll see where things are at in a few weeks.

Regards, makingourway

1 comment:

Kay said...

Mortgage interest on a second home is deductible. So are property taxes on both homes (actually property taxes on all properties you own, not just two). Maybe that will help a bit.