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Pay extra each month or relax

D

Dice144

Senior member
Basically fighting myself if I should keep putting some of my monthly saving into stock/savings (mixed).

For the last two years I was barely spending any of my income except to pay off all debts and buy a house. Got the house July 24th.

Now the closing costs was 3k less than I budgeted for. So debating paying a few $100 more each month extra (yes I have an emergency fund already) to pay it off early. I am only able to pay extra because renting one of my spare rooms and renting out half my garage to a motorhead friend.

Rent $300 a month plus $75 for garage. So invest the $375 a month or pay down mortgage faster?

I am a workaholic and use all my overtime pay to buy my computer toys.

And no I am not rich (make less than 45k a year).
 
i vote for invest it, preferably in 401k or ira. or roth ira if you want to be able to get the money back out if you see the need.
 
Personal choice...me..."debt free is the way to be" to spend $$ on other stuff. Others, debt to the hilt to have fun/toys now.
 
3.5% on house. Haven't paid a cent of interest on credit cards in about 3 years.

I was putting 27% into my 401k when I started with the current job to "catch" up on my slacking 20's investing. Now I have it at 12%. Company matches the first 10% up to 66.67%. So maxed that out.

All my dividend stocks are drip reinvested.

My Mom yelled at me saying you need to make memories etc. So I took kid to Disney vacation this summer with overtime pay.
 
Pay off the house in 15 years. The following 15 years you will be paying the mortgage into your savings account instead of it going to the lender.
 
Dice144 said:
3.5% on house. Haven't paid a cent of interest on credit cards in about 3 years.

I was putting 27% into my 401k when I started with the current job to "catch" up on my slacking 20's investing. Now I have it at 12%. Company matches the first 10% up to 66.67%. So maxed that out.

All my dividend stocks are drip reinvested.

My Mom yelled at me saying you need to make memories etc. So I took kid to Disney vacation this summer with overtime pay.
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Don't make the mistake of saving every last dime "for retirement" in the hope that you might retire a few years early or can live the high life while retired. That day may never come (you may die early, you may be in poor health, etc) so try to strike a balance between saving and enjoying life. I agree with your mom's advice though maybe you can sock some of it away to help your kid with college?
 
Dice144 said:
3.5% on house. Haven't paid a cent of interest on credit cards in about 3 years.

I was putting 27% into my 401k when I started with the current job to "catch" up on my slacking 20's investing. Now I have it at 12%. Company matches the first 10% up to 66.67%. So maxed that out.

All my dividend stocks are drip reinvested.

My Mom yelled at me saying you need to make memories etc. So I took kid to Disney vacation this summer with overtime pay.
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Agree with your Mom. No $$ will ever supplant/replace/emotionally fill you over your kid. I'm learning that late...I hope not too late.
 
Vic Vega said:
You make less than $45K? Does that mean $44K?

At your income level I would want to be as liquid as possible. I would pile that money into an accessible savings account for as long as it's coming in and leave it alone.
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Well if I keep working a few hours of overtime I week will be over 50k without counting my secondly passive income/pension.
 
Dice144 said:
Will try to keep balance. Which is hard as hell for me.
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My philosophy has shifted over the years from material things to "experience things." Sure, I still have modern gadgets and stuff, but I place more value on experiencing new places, restaurants, etc. than I did before. The rule of thumb for my wife and I is that we will not go into debt to take vacations, etc. We pay off our cards every month and if we think we won't be able to do that, we don't make the purchase. When we're going on big vacations, we often book months in advance so each month, we can purchase things needed for our vacation without being hit with expenses all at once.
 
rudder said:
Pay off the house in 15 years. The following 15 years you will be paying the mortgage into your savings account instead of it going to the lender.
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Possibly the smartest thing you can do, people simply don't realize the gains from paying off a mortgage early.
 
shabby said:
Possibly the smartest thing you can do, people simply don't realize the gains from paying off a mortgage early.
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That might seem great on paper....but you can look at it all sorts of other ways. If you had say 5000 to either go towards the house or put in the stock market 2 years ago you could either have made a ton of money or knocked off a tiny amount off a mortgage. Both are great (dont get me wrong) but many people (many not all) have been able to make 10% or more in the stock market going with funds. So that 5000 is now ~6000. Which you could pull out when its larger and close to what you owe on the mortgage.

but like everything it is all about choices. 3.5% is pretty low and *has* been decently to make more than that in funds.

Personally i do a bit of both. Pay a bit extra on the mortgage and put a bit extra into my retirement/savings.
 
gevorg said:
correction is coming... :whiste:
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I kept buying during the last correction and did very well. And my existing index fund shares fully recovered after a couple of years. If you stay calm a correction just means you are getting a discount while everyone else panics.

Paying off the mortgage sounds nice, but it's also very nice to have more than just an emergency fund available.

You can sell a stock index ETF in one day if you need to, and you can sell 1 share or every share that you own. You can't break off a piece of your house and sell it.

Paying a little extra on the mortgage to shave years off of it might be worth it just for the good feelings it gives you, but I'd still put the majority of the money into a good stock index ETF.
 
I'd pay a bit more on the house, given you already have an emergency fund, invest some of it too though. Maybe go half half. If something major comes up you can always dip into the home equity. It will set you behind in the mortgage but it's better than incurring a new debt, and you'll be ahead on the mortgage anyway so it might not make too big of a dent depending on how much the value went up.
 
Besides your "emergency fund", you should put aside some money for house expenses. Plumbing, appliances, roofing, HVAC......

Since you are new to owning a home, you're probably not in the habit of checking the roof, or noticing cracks in the ceiling, or noticing that the toilet doesn't seem to be flushing as well as it normally does. But you'll start to pick that up pretty quick now.

When the heat goes out in the middle on winter (or the AC in summer), you'll find yourself with a very large bill that you weren't planning on. It's nice to have some cash set aside to cover a sudden bill like that.

I say put any extra cash in an accessible account (like interest bearing checking account or short term CDs). That will keep you from just pissing it away, but you can still have access to it to take the family on surprise trips.
 
skimple said:
Besides your "emergency fund", you should put aside some money for house expenses. Plumbing, appliances, roofing, HVAC......

Since you are new to owning a home, you're probably not in the habit of checking the roof, or noticing cracks in the ceiling, or noticing that the toilet doesn't seem to be flushing as well as it normally does. But you'll start to pick that up pretty quick now.

When the heat goes out in the middle on winter (or the AC in summer), you'll find yourself with a very large bill that you weren't planning on. It's nice to have some cash set aside to cover a sudden bill like that.

I say put any extra cash in an accessible account (like interest bearing checking account or short term CDs). That will keep you from just pissing it away, but you can still have access to it to take the family on surprise trips.
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Isin't that what emergency fund is for? :hmm: Situations where you need extra money and it's an emergency. Just be sure to add more money to it on a regular basis of course.
 
I was able to get a 2.75% rate on my house and I just put a little extra towards it per month (about $130?). This last month I put more just because I had it. The way I look at it - it does way better than my savings account when "saving" 2.75% vs earning the 1% or whatever I get in the savings. But this is because my savings is quite healthy right now.

But, if I had someone renting I would definitely put it all into the principal, simply due to the source of the income. I have no need for extra cash until I can spend it freely, I.E my debts are gone.
 
Red Squirrel said:
Isin't that what emergency fund is for? :hmm: Situations where you need extra money and it's an emergency. Just be sure to add more money to it on a regular basis of course.
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I guess that I don't categorize it as "emergency" when I know something's coming. Like car expenses. I know that sometime in the next two years, I going to need some car repairs that will cost me a couple of thousand dollars. I don't really think of that as an emergency, since I should be expecting it.

I always think of emergencies as things like hospital bills, loss of job, etc...
 
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