What to do with 1 year increased pay?

Doing something with it to improve your monthly budget situation after your salary goes back down makes a lot of sense. It is an opportunity to free up discretionary spending at a lower income. That usually leads to less stress and more enjoyment.

Max out your 401k first. Your future self will thank you.

Enjoy it now on hookers and blow. After you get married and have kids it will all disappear anyway.

How much is the pay increase and what will it go back to in 2025?

You seem to be in a pretty decent spot for 31, why not do something for yourself with it?

Put half into maxing your 401k and spend the other half on a trip you've always wanted to do.

Or theres always cocaine and hookers... but don't forget about Iraqi Dinars

That PMI is really high. What do you need to get the mortgage balance down to in order to eliminate it? For example, let’s say at a $305k balance, PMI drops off. That’s $30k.

You are paying $1,896 a year in PMI. If you threw $30k at the mortgage, that’s pretty much an immediate 6.3% return on your money for eliminating PMI + a 3.25% return for paying down your mortgage.

There are some nuances to the numbers above, but given your excessively large emergency fund and increased salary, paying down that mortgage to eliminate PMI is a no brainer to me if you plan to be in the house at least another year.

Fund a Roth IRA and max HSA before more taxable investments. HSA I'd triple tax advantaged pay out of pocket if you can and keep reciepts for future tax free withdrawals.

A few of things…

I assumed (maybe incorrectly) that you had a conventional loan. If you don’t have a conventional loan, then you are stuck with PMI unless you refinance. If you have a conventional loan, you can get rid of PMI through two ways:

1. As you stated, pay for an appraisal and loan needs to be 80% of value of home. This may be worth if if you feel the property has appreciated significantly since you bought it.

2. Paying down your mortgage to 78% of the original sales price. PMI automatically goes away when you reach this milestone. No appraisal needed.

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My struggle is that it feels like I'm tying up $31.5k in exchange for $1900 per year. Yea I guess that's a 6% return, but my 401k has been outperforming that

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Keep in mind the added benefit of paying down your 3.25% mortgage which gives you a total ~ 9.25% return. That’s how I view it.

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and I believe you get a tax deduction for PMI?

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It’s deductible if you itemize but not if you take the standard deduction which applies to the overwhelming majority of the population and likely to you.

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Is it really best to tie up all that money? That could be used for a down payment on a rental property if I chose to get off my arse and jump into that world

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Ultimately your call… you are correct, a lot of things you can do with this cash. For someone single and 31 I feel like that’s a lot of cash on hand. Personally, I’m also not really a big on emergency funds unless you don’t have any assets. That doesn’t apply to you. You could tap brokerage and Roth IRA for emergencies if needed.. plus the $20k cash you’d still have after paying down mortgage.

Agree. Max out and I wish I would have bought more Roth IRA’s. You’re in great financial shape for your age.