Have extra cash what would you do?

[jamesong55]

We just got a settlement on our property where the state took a little land We had a second mortgage which we paid off and now have about 13,500 left. I was going to throw all that towards the mortgage but I also owe 1,200 to my kiddos private school for the rest of the year it would be nice to get rid of that 250/month payment so we can breathe???

What would be the best option?? I can justify either one to benefit me the best so I need outside info

TIA
Tina

[kings5queens4]

Do you have any kind of emergency fund set up?

I would throw $5 K at a small emergency fund, definitely would pay the tuition in advance- I would even call and ask if I could get a discount for paying all up front in cash- it never hurts to ask! And then I would put the rest towards the morgtage if I had no other debt.

[jamesong55]

Thanks I have about 3,000 saved so thats a good idea and no other debt

[SunshineJ]

First personally I'd probably drop to my knees and thank the gods that we weren't flat ass broke at the moment, but then it's been that kind of year for us!

Next, this is what I would do:

Pay the tuition first. That drops it to $12,300. Put about 7k into savings so you have a 10k emergency fund. Put 5k towards the mortgage (as well as the $250 you'd be paying to the school otherwise). And after allocating all that money very wisely, take the left over $300 and get something your family wants with it.

[annethcz]

Before paying down the mortgage I'd definitely establish a bigger emergency fund. I'd want at the bare minimum 3 months of expenses in savings. 6-8 would be better.

If you want to pay the school tuition ahead of time, that would be fine. But I agree with a PPer that I'd probably use the extra $250/month to put towards the mortgage principal.

[velochic]

How long do you plan to be in your current home? I've never been an advocate of paying off a mortgage early in most cases. Usually, it's the lowest rate loan you'll ever get (barring some student loans, perhaps). I would not pay off the mortgage early unless it is your remaining debt and you have an 8 month emergency fund. Over the weekend, during her program, I was surprised to hear that Suze Orman is of the same mind about mortgages. Don't pay them off unless you are planning to be there for, well, basically, the rest of your life, is her opinion.

So, I would pay ahead on the school and then put the rest of it in an emergency fund. The bigger the EF, the better, though, and I think a year's worth of EF is a great goal to set.

[TiredX2]

Where are you with retirement savings? After having an adequate emergency fund I would look into a Roth IRA. You can still fund one for 2009. Once the time has passed for retirement savings you can never get it (tax advantaged) back. If you need it in the future you can always take the contributions out without tax or penalty, but if you don't *NEED* it it will be there for when you actually need it in the future. I like the idea of pre-paying mortgages for comfort, but not if you do not have your other financial ducks in a row (no cc debt, adequate emergency fund, etc...)

[Logan's Mom]

Originally Posted by velochic

How long do you plan to be in your current home? I've never been an advocate of paying off a mortgage early in most cases. Usually, it's the lowest rate loan you'll ever get (barring some student loans, perhaps). I would not pay off the mortgage early unless it is your remaining debt and you have an 8 month emergency fund. Over the weekend, during her program, I was surprised to hear that Suze Orman is of the same mind about mortgages. Don't pay them off unless you are planning to be there for, well, basically, the rest of your life, is her opinion.

Also, what about putting $ in a ROTH? If you have a 401k through work, you may want to look at increasing that as well.

I'm also a big advocate for getting a little something for yourself. Ie: a couch you've been wanting, a mini-vacation, a night out or a mani/pedi.

[A&A]

When we got some extra money (for a similar reason, actually) we bought a new energy-efficient furnace, a new energy-efficient front window, and insulation for the attic. So our monthly heating costs have gone down. So my suggestion would be, depending on where you live and the condition of your house, to consider putting some of the money toward "weatherization."