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Should I pay off my mortgage, begin retirement savings, or build my emergency fund?
Welcome to Money.SE. I will say upfront, Personal Finance is just that, personal, and you are likely to get multiple, perhaps conflicting, answers. Are you sure the PMI will drop off after 2 years? The rules are specific, and for PMI, when prepayments put you at that 78/80% LTV, your bank can require an appraisal, not automatically drop it. Talk to the banks, get confirmation, and depending what they say, keep hacking away at the mortgage.  After this, I suggest jumping on Roth IRAs. You are in the 15% bracket, and the Roth will let you deposit $5500 for each you and your wife. A great way to kickstart a higher level of retirement savings.  After this, I'm not comfortable with the emergency savings level. If you lose your job tomorrow (Funny story, my wife and I lost our's on the same day 3 years ago) and don't have enough savings (Our retirement accounts were good to just retire that day) you can easily run out of money and be late on the mortgage. It's great to prepay the mortgage to get rid of that PMI, but once there, I'd do the Roth and then focus on savings. 6 months expenses minimum.  We have a great Q&A here titled Oversimplify it for me: the correct order of investing in which I go in to more detail, as do 4 other members.  I am not getting on the "investments will return more than your mortgage cost" soapbox. A well-funded emergency fund is a very conservative bit of advice. With no matched 401(k), I suggest a balance of the Roth savings and prepayments.  From another great post, Ideal net worth by age X? Need comparison references you should have nearly 1 year's salary (90K) saved toward retirement.  Any question on my advice, add a comment and I will edit in more details.