Financial advice post-tenure?

[emprof]

I was awarded tenure this year (yes, I absolutely know how rare that is and how lucky I am - I still can't quite believe it.) It comes with a modest raise of $5k. Which puts me just slightly ahead of our most recent hires - salary compression has already come for me.

o wise forumites, should this change anything about our finances? My husband is staff at the university with good job security but painfully low pay. We scrimped and saved to build a good emergency savings fund in case I didn't get tenured and we had to move, and recent medical events (and a surprise furnace replacement) have put a big dent in it.

Given my new job security, I'm inclined to NOT continue to scrimp and save to rebuild the savings back up so high. There's plenty of other places that money could go: We want to do quite a bit of work on our house before we sell it in 3-5 years, for one thing. For another, we haven't had a vacation in almost 4 years. And our daughter's college fund is pretty anemic.

Did anything about your finances or budgeting change after tenure?

[arcturus]

Congratulations on earning tenure! That is a notable achievement and should be rewarded both on the financial side (a raise!) and emotional side (job security!). With this job security, it is probably fine to back off on an excessive emergency fund, but please be aware that tenure does not guarantee that there will not be a loss in pay (furloughs) or job loss during times of financial difficulty for your institution. For context, there are many institutions that are furloughing faculty this year. Several institutions are also firing tenured faculty due to financial exigency. So, while you should celebrate your achievements, and put some of your extra cash into home improvement and personal well being (vacation!), it is probably wise to remain frugal and conscious of your budget limitations. Again, congratulations on tenure!

[spork]

[. . . ]

Did anything about your finances or budgeting change after tenure?

Because tenure increased the likelihood that we would be staying put for many years, I began investing in home improvements, initially to increase the house's energy efficiency -- projects that would pay for themselves over time through lower utility bills. The final project was the most expensive and improved our quality of life the most -- replacing a 50-year old kitchen that was literally falling apart.

However, during this period we also increased our annual contribution to our 403(b) retirement accounts to the legal limit.

I don't have children and am blissfully unaware of children's college savings funds.

[clean]

Emergency funds are not exclusively for job loss.  That is certainly ONE form of an emergency, but as the furnace indicates, not the ONLY kind! 
IF you have no non mortgage debt (pay off your debts first!) then rebuild the emergency fund.  Tenure is nice, but it is not exactly a guarantee of a job!  Especially today, there can be furloughs, pay cuts and at the extreme, programs can be cut and as we know, tenure is out!  If things get bad enough, the university can still fire you and as the NEWEST tenured person, should things get really bad, you are still one of the first to go. 

You need to consider if you are sufficiently funding your retirement.  (Certainly YOUR retirement (and spouse) should be prioritized above the college fund.)  Let your youngin(s) know that THEY will have to put some skin in the game through either scholarships or work savings. 

Still, you Can save for something nice.  A vacation doesnt have to cost $5000!  (Besides, at present, WHERE CAN YOU GO?  and HOw can you get there?)  You can treat yourself to something, but it would not hurt to review the expenses that you have and see what you need!  Cut the rest!  Make sure that each dollar of expenditure is justified! 

Bottom line. 
Pay off non mortgage debt if you have any
Rebuild emergency fund  (to a level of 6 mornths worth of EXPENSES - not income)
Review Retirement accounts and make sure that YOU are contributing at least 15 % of your gross income in retirement. (IF there are matches, that is fine, but those are gravy, make sure that YOUR contributions are at least enough to ensure you will not have to work til you drop!)
After all of that, you can add to your youngins' college funds. 

[dismalist]

Much depends upon your age.

If there's a long time to get to retirement, there is no need to save so much for that event, unless you really value the future very much above the present.

At low interest rates it doesn't necessarily make sense to pay off debt quickly, unless you really value the future very much above the present.

It all depends on how much you value the future compared to the present, how risk averse you are, and what the interest rate is. There is no general answer: It's about you and your family.

Congratulations, and best of luck!

[jimbogumbo]

Congratulations! Even though you expect to sell in 3-5 years, never miss the chance to refinance if the pay back time is comfortably within your window of ownership.

[Hegemony]

I agree about the emergency fund. Build it back up.

1. Emergency fund
2. Retirement funds. The earlier that money goes in, the better. Fund it at least up to the level of your tax deduction. 403(b), and then IRA. Put it in Vanguard index funds, assuming that your emergency fund is in a CD or other safe vehicle.
3. College savings.

Reflect that most home improvements will not make the money back when you sell the house. If they're necessary things — fixing roofs, boards coming loose, etc. — they will need to be done. Cosmetic improvements will not earn their keep, and you won't even be there long enough to enjoy them. Just paint where needed before you sell and be done with it. I also disagree about refinancing, unless you have a crazy high mortgage rate, like 15% or something. The costs of refinancing are such that you need to be there a number of years to recoup the expenses.

The more prudent you are about finances now, the better off you'll be down the road, and the more you will thank your younger selves.

[Vkw10]

Congratulations on making tenure!

Completely rational me says to put 25% of raise toward emergency fund and 75% toward retirement.

Realistic me says that very few people are that disciplined. I'm not that disciplined. For first paycheck, use entire raise on something fun. After the first paycheck, put 25% of raise into savings for something you'll enjoy in the next year or two (vacation?), 25% into emergency fund, and 50% into retirement fund.

After emergency fund is equal to six months of expenses, move that money to another goal. If you are already putting at least 15% of gross salary into retirement, you can put towards college fund, unless you're behind on retirement savings. According to Fidelity, you should have 1xSalary by age 30 and 3xSalary by age 40.

Your retirement fund may have to support you for 30 years or more. That's why I'd prioritize retirement fund. But the most important part is to make a plan and stick with it. Otherwise, your standard of living will increase slightly and a year from now you'll have no idea where that $5000 went.

[clean]

I want to remind us of the grasshopper and the ant story, but relate it to emergencies. 
We are in the midst of an illness outbreak that has some pretty had effects on the finances of our industry. Should we not have students back on campus for extended periods again, then student fees will drop. The fees that pay for dorms, parking, student unions and the like.  In many places, the debt on those structures is guaranteed by the university. They have to be paid. IF the money does not come from students, it still has to be paid.  The largest bill the university faces is in faculty salaries.  I draw attention to the Furlough thread.  The harshest one I remember from my reading of it is Arizona.  Salary cuts are hitting the highest paid the hardest, (20% for the top... so a faculty member earning $200K is taking a $40K hit!  I dont care how much you make, $40 grand is going to be felt!).  From what I recall, Coastal Carolina University in SC is cutting wages of faculty and staff for people making as little as $35000. 

The point is that faculty all over this industry are facing Pay Cuts!  That is a pretty harsh reality and may even rate as 'Emergency" to many.  You can have fun once you are sure you are safe.  Rebuild your emergency fund.  I think that I noted six months' of expenses.  Suze Orman has been pushing the recommendation to 8!

On the other hand, there is a school of thought that says, in the long run we are all dead anyway, and the ones that have the most fun and die with the most debt Win!  (these are the grasshoppers... and I always wonder if the ants dont eat the grasshopper in the end of the story).

[Volhiker78]

I agree about the emergency fund. Build it back up.

1. Emergency fund
2. Retirement funds. The earlier that money goes in, the better. Fund it at least up to the level of your tax deduction. 403(b), and then IRA. Put it in Vanguard index funds, assuming that your emergency fund is in a CD or other safe vehicle.
3. College savings.

Reflect that most home improvements will not make the money back when you sell the house. If they're necessary things — fixing roofs, boards coming loose, etc. — they will need to be done. Cosmetic improvements will not earn their keep, and you won't even be there long enough to enjoy them. Just paint where needed before you sell and be done with it. I also disagree about refinancing, unless you have a crazy high mortgage rate, like 15% or something. The costs of refinancing are such that you need to be there a number of years to recoup the expenses.

The more prudent you are about finances now, the better off you'll be down the road, and the more you will thank your younger selves.

This +1000.

[apl68]

On the other hand, there is a school of thought that says, in the long run we are all dead anyway, and the ones that have the most fun and die with the most debt Win! 

There's another school of thought that points out that you can't take it with you, but you can send it on ahead.  "Do not lay up treasures for yourself on earth, where moths and rust destroy, and thieves break in and steal.  But lay up treasures in heaven, where moths and rust do not destroy, and thieves do not break in and steal."

Or alternatively, "He is no fool who gives what he can never keep to gain what he can never lose."

That said, paying down debt and having something set aside for a rainy day is not a bad idea.