Where to put any Monthly surplus (after bills)

[dxkj]

Ok, so aside from that Simpsons reference.


135k mortgage 5.5%
9.5k car loan 3.9%
20k student loans 2.8%


5 months worth of "emergency" savings


Monthly surplus, put it in:

A) Invest
B) Pay off loans
C) Put extra into mortgage payments
D) Savings 3%

What does common sense say to do? I feel like A) Is a risk, where C is a set 5.5% return on my money each year (in a sense) D) is for additional expenses and emergencies


Opinions?

Edit: I was thinking of doing 70% C and 20% D, and maybe 10% A

 

[Schadenfroh]

Pay off your debts before you start investing.

 

[dxkj]

Originally posted by: Schadenfroh
Pay off your debts before you start investing.

Mortgage is a debt? or ,,,

 

[Nitemare]

Originally posted by: Schadenfroh
Pay off your debts before you start investing.

cept your mortgage because it is tax deductible

 

[CPA]

Originally posted by: Schadenfroh
Pay off your debts before you start investing.

Not if his return is better.

 

[hypn0tik]

I'd suggest Low-Medium risk Mutual Funds. Let the savings grow and see if you can take a certain amount out every month or every two months and use it to pay off the loans.

 

[akubi]

Originally posted by: dxkj
Edit: I was thinking of doing 70% C and 20% D, and maybe 10% A

getting 3% on savings while paying 3.9% on some loan makes little sense :laugh:

 

[dxkj]

Originally posted by: Nitemare

Originally posted by: Schadenfroh
Pay off your debts before you start investing.

cept your mortgage because it is tax deductible

I dont like that reasoning.... because you dont get ALL of that interest you paid out back.... only a percentage of it.... Im sure a tax person or CPA could explain it better. or give a more exact measurement.

 

[dxkj]

Originally posted by: akubi

Originally posted by: dxkj
Edit: I was thinking of doing 70% C and 20% D, and maybe 10% A

getting 3% on savings while paying 3.9% on some loan makes little sense :laugh:

It makes a TON of sense


IE: Emergency/neccessary purchase, stuck on a 20% rate credit card because you didnt have enough savings TROUNCES the .9% gained on a car loan

 

[Manchurian Candidate]

Originally posted by: Schadenfroh
Pay off your debts before you start investing.

not necessarily, do you have a job? and how old are you? those two questions matter

 

[dxkj]

Originally posted by: Manchurian Candidate

Originally posted by: Schadenfroh
Pay off your debts before you start investing.

not necessarily, do you have a job? and how old are you? those two questions matter

Yes FT job, Im 23

 

[dxkj]

^ any other advice from the afternoon group

 

[chrisms]

The best investment

 

[Manchurian Candidate]

ok here is what you do with your money. if your employer matches your 401k up to a certain amount, put in that maximum account. if you have anything left, invest it in some mortgage backed securities.

 

[Baked]

Lottery tickets. Scratchers if you can't wait.

 

[Patt]

Most of it goes to my wife ...

 

[DaveSimmons]

Is your 401k already up to the % that your employer will match? If not, do that. 20-30% tax savings + employer match + growth of investment = profit!

If you aren't making over $100K or so (see IRS booklet), are you already making the maximum contribution of $4K/year to a Roth IRA? This investment grows tax-free so putting in $4K/year every year can be a better deal than paying off low-interest debt.

For the Roth, as usual I'll suggest www.vanguard.com and their VFINX S&P500 index mutual fund.

 

[everman]

I don't see any accounts for retirement, do you not contribute to one? It's a great time to start.

 

[Kalbi]

Originally posted by: Schadenfroh
Pay off your debts before you start investing.

DO NOT PAY OFF YOUR DEBTS. Those are uber low rates, often referred to as "cheap money." Your after tax effect of that 5.5% is lower depending on your income. Key is to stay liquid; put part of it in the 3% savings, and the rest put in dividend yeilding stocks such as any REITs or Phillip Morris/Merck/dividend paying blue chips. Diversify your investments just in case Enron happens.

 

[dxkj]

Originally posted by: Manchurian Candidate
ok here is what you do with your money. if your employer matches your 401k up to a certain amount, put in that maximum account. if you have anything left, invest it in some mortgage backed securities.

employer matches 0 or I would, definitely a no brainer

 

[dxkj]

Originally posted by: everman
I don't see any accounts for retirement, do you not contribute to one? It's a great time to start.

Im vested at my job. No 401k bc the employer doesnt match anything, but I have an account started from being vested.


My wife's 401k is started already. Im thinking of starting one up, but wasn't sure exactly where our finances would be at.

 

[dxkj]

Originally posted by: Kalbi

Originally posted by: Schadenfroh
Pay off your debts before you start investing.

DO NOT PAY OFF YOUR DEBTS. Those are uber low rates, often referred to as "cheap money." Your after tax effect of that 5.5% is lower depending on your income. Key is to stay liquid; put part of it in the 3% savings, and the rest put in dividend yeilding stocks such as any REITs or Phillip Morris/Merck/dividend paying blue chips. Diversify your investments just in case Enron happens.

Currently have 7k in XoM dividend paying.

 

[Skiddex]

i used mine up on hookers and blackjack...nothing left, except a bad case of crabs

 

[dxkj]

Originally posted by: Skiddex
i used mine up on hookers and blackjack...nothing left, except a bad case of crabs

weird... Average Posts Per Day: 0.31 and that is your contribution for the next 3 days?! Amazing

 

[Jeff7181]

Originally posted by: Schadenfroh
Pay off your debts before you start investing.

I don't agree... smart investing can make more money than you'll be paying in interest on a mortgage or loan. For example... a friend of mine had $20,000 in student loans to pay off 3 years ago. She had enough in the bank to pay it off, however, her student loan was locked at 3% or something like that. Her monthly payments were around $150. I told her to set aside $5,000 for paying the monthly payments for a while, and I'll help her invest the other $15,000. Now, this past February, we cashed in her investments for $22,000. She used $15,000 of that to completely pay off her student loan, and had me reinvest the other $7,000, which is now just shy of $8,000.

If she had just used that entire $20,000 that she had to pay off her student loan, she wouldn't have that $8,000 in her portfolio right now.


*EDIT* I also got my parents to sell a couple mutual funds they had and let me reinvest the money. It amounted to $4000. With the fee's (I use Scottrade) it ended up being a $3960 investment, which is worth $4409 as of Friday. The market looks like it did well today, so I expect the value will be higher today.