What would you do?
I'm not quite there yet, but I'm eager to be and trying to motivate myself for another tight month while we pay down debt.
I'm in need of ideas.. Can't decide if my next financial goal will be:
-Building EF to 12 months worth of expenses, then 18 months, 24 etc.
-Paying down part of the mortgage
-??? or something else that I did not consider..
I'm not interested in contributing anything to retirement at this point. DH's super isn't doing too badly and he is not too keen on retiring anyway.
Which path would you choose? And why?
Our babies: and a coming in July
Personally I would go with the emergency fund for the most part. Once I had a couple of months expenses in savings, I would divide what I was putting in between the emergency fund and a Roth IRA. When I had 6 months of expenses saved, I would still be putting money in Roth and the e.f. but but a bit of it in a car replacement fund as well -- every month. Once I had about 12 months expenses saved and my Roth and other retirement vehicles exhausted, I would just invest in some other way, I wouldn't keep it all in a savings account. I personally think the options of disability and life insurance would be more of a priority than the mortgage.
I have been trying to make the same choice. No consumer debt, no car loan, have 4 months expenses saved plus I put $ in a car fund every month. Next goal is disability insurance (already have life). I don't have a mortgage but I am ready to buy this year. Once I own the house, I will put some $ in a house repair fund, increase my emergency fund, and still hopefully keep maxing out my Roth. I do tend to max out the Roth as a priority over increasing savings because you can't get the opportunity again to put in that $6000 (yes, I am over 50!) BUT in case of a real emergency, I could take out the principle without penalty. And the funds I am invested in seem relatively secure as they showed a decent return even in 2008 with the stock crash and all. The IRA is also diversified into higher and lower risk options.
Eventually I am considering switching my Roth to a self directed IRA and buying investment rental property; but at this time the amount just isn't there.
Truth is, once you pay off consumer debt and are used to simply living below your means (and have learned how to really enjoy it), pretty much all of the options are good. Paying down my mortgage, once I have one, would probably come after maxing out retirement fund (I only have option of Roth at this time), but BEFORE investing in some kind of side business. Advantage of having a side business is not only making money, but it also increases your investment options, as then you can open a Solo 401K and you can also self direct THAT so you could, for example, buy a small business tax liens or rental properties within your Solo 401K.
Im in this position too, and my priorities are
1a. cash savings (for me, continue to add to an EF, which can turn into a large nest egg. At a point I feel comfortable, I would move chunks to a taxable investment account)
1b. Continue my IRA, (started two years ago)
2. I'm not that interested in paying off my mortgage perhaps because it is not my "forever home" and almost a 1/2 of the payment is for taxes, insurances etc anyhow. It helps for itemizing on taxes. But paying less interest overall is a consideration, so I think of refinancing, so long as I can get an assumable mortgage.
3. car fund, vacation fund.
My priorities are such that I feel most comfortable with cash savings over paying off mortgage. I will be able to sell the house and make $$ (due to the renos). My IRA gives me a sense of stability as well and I like to see this money grow. A car fund, so when I finally feel its needed (my current car is paid off and 10 yrs old and its really nice not having a payment)
We don't have a Roth IRA available here.. We've got a retirement fund going (with monthly contributions) though. It seems to be going okay so far.
At what point would you consider stopping the EF and putting the rest into a term deposit?
I'm thinking a furniture and home improvement fund might be a good idea.
So now I'm thinking:
Finish paying off all non mortgage debt.
Start a furniture and home improvement fund to X amount of dollars.
Work on 12 months expenses EF (save and keep in a mortgage offset account).
Part contribution in term deposit thereafter and part contribution in extra mortgage repayment?
I'm not one of those people who are comfortable in investing simply because I have no idea what I'm doing. The extent of my investing is putting money in a term deposit.
Our babies: and a coming in July