In about a month I am getting around 220k from a home sale. This was our primary residence and will be getting it tax free due to the 2/5 rule. I’m 29 and have a little under 200k in investment accounts. Our current home is worth about 600k and we owe around 300k on it. I have a 6.4% rate there.
So the options…
A. Invest the 220k long term in stocks. I’d put some in high conviction individual stocks and the rest in ETFS
B. Invest most, but pay off a 9k truck note and 17k in student loans (3-4%)
B. High yield and sit on my money until I have enough saved to pay off the mortgage without liquidating
C. Liquidate everything and pay off the mortgage
Ultimately, I’m already leaning in one direction and understand the investment game… I’m 29 and doing I’d say pretty good. Just looking to see what the stock community thinks.
Posted by Medical_Grapefruit94
6 Comments
I would personally throw all $220K at the auto loan, student loans, and anything leftover at the mortgage without selling any investments. (Assuming you have savings for an emergency fund. If not, this is your #1 priority)
But I also don’t like having debt, especially non-mortgage debt.
I don’t think you have a bad option, but sitting on cash is definitely the worse thing you could do. Any high yield savings account will yield less than the interest rate on your home, so you will be worse off over the long term. Additionally, inflation will eat up your cash even in HYSAs.
B first.
Then half in stocks and other half in HYSA.
Pay off the truck and loans. Fully fund an emergency fund into a hysa. Invest the rest. Evaluate your budget. Crunch the numbers on paying extra on the mortgage to save the interest in the long run.
For peace of mind, pay off all the debt, particularly prioritize high interest debt. You have plenty of time for investing.
I speak from experience, i.e., I retired early with an overly generous pension; made good investments; and, paid off my last mortgage (WA State). “Every time you borrow money, you’re robbing your future self.” — Nathan W. Morris
Pay off the student loan and truck.
As far as the house, its 50/50 and up to you. I personally would not pay it off because I dont like having all of my wealth tied up in an illiquid asset. I also itemize my taxes so the cost of interest is deductible, this makes other investments a better option because the effective cost of interest on the house <3% in my case.
1st pay off debt
2nd take 20% of what’s left and put it in HYSA or SGOV
3rd take 10% of the remainder in individual stocks
4th, dump the rest in 5 or six equal injections into VTI over the next few weeks/months depending on market conditions
5th watch rates like a hawk and refinance when you have the opportunity. DO NOT take any cash out when you refi.