I been thinking about ways to maximize the money i have saved. Here's the current situation:
Salary is about $80K a year and my wife makes about the same $80K. We sold our house a few years back and moved in with my Parents to take over their mortgage. They're getting older, need the help and they have the space for us and our kids. We made about $120K off of selling our house. I'm trying to think of the best way to use the money we currently have saved up which is about $220K. Do we continue to let it sit in our money market account (3-4%) or do we look to pay off some of the debt we have and slowly rebuild the savings? What would be the ideal and smart approach here? What are some things i should consider? We don't make a lot of money like some folks here but we have been fortunate enough to be saving money here and there to be where we are at.
Mortgage – $146K left @4.375% ~$1570 a month
My Student loan – $27K left currently on hold since COVID
401k has about $150K
Individual stocks ~$35K
Both cars paid off
no other debt beside typical living expenses such as phone bill, a few subscriptions, internet and utilities.
Posted by Jav_Bez
4 Comments
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honestly, this sounds less like a crisis and more like you need labeled buckets.
emergency fund in hysa, money needed in the next few years kept safe, retirement kept invested, and then figure out the student loan once the hold ends. i would not be in a hurry to kill a 4.375% mortgage just because the cash is sitting there.
What is your parent’s health insurance situation, and are they at risk of facing large medical bills in their future? You said you moved in to take over their mortgage. Does that mean the property title has been transferred to you? Do you have siblings?
Normally I would say mortgage debt at that rate on your income is better invested elsewhere, but it might be prudent for you (if you need to) to explore ways to take ownership of the house while they’re still living and perhaps sooner rather than later. The last thing you want is for them to pass with medical debt that needs to be paid out of their estate.
Everyone must build an emergency savings fund as soon as they can. It’s always step 0 of good personal finance hygiene.
Student loan – There’s no reason to pay a debt that has 0 interest. It’s a good investment to keep it. Make the minimum payments until that changes.
When your student loan starts charging interest, if that interest is >7%, pay it all off as fast as possible. if that interest is less than 7%, just keep making the minimum payments *as long as you put the rest of the money you would have put towards it into stock investments instead.*
I don’t recommend making more than the minimum payments on your Mortgage unless you have an equity level which would remove a mortgage insurance payment from the monthly bill. 4.375% is a great loan, put the money towards stock investments instead.
Invest in broad market, low fee ETFs such as SCHB or VOO. Do not speculate on individual company stocks.