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  1. #1

    Default What to do with extra money each month?

    I have two more monthly tuition payments to make in March and April and then college expenses will be complete.

    Once that happens, we will have at least 3K/month extra in our pockets. We owe 13K on our HELOC so my first order of business will be to pay that off. That will take about 4 months. So once September rolls around, I need to figure out what to do with the extra funds going forward.

    I'm currently contributing 10% to my 401k. Along with funding our Roths, we're putting about 17% into retirement accounts. I could bump up the 401k contribution which would reduce our taxable income.

    I could accelerate paying off what's left of the mortgage - 28K. At 3K/month, we could be mortgage-free in about 9 more months.

    I do want to direct at least some of the excess into cash savings for short term stuff like my next car. My current car is 12 years old and although it's still under 100,000 miles, it has some issues that will either warrant repair or replacement probably sooner than I'd otherwise want to get another car.

    There's also a some maintenance on our house that will need attention at some point. I know our roof is nearing the end of it's lifespan, for example. So building up the cash reserve definitely needs to be part of the plan.

    Any thoughts on what you would do in this situation? I know that it doesn't have to be an either/or kind of thing. With 3K/month to deal with, I can certainly split it up and address several things.

  2. #2
    After the Heloc is paid.

    Given the info above I would contribute more to the 401k (18.5 plus the catch up is too good to pass up assuming you have good funds with low expenses in the 401k) and build up your cash reserves for car and a new roof/home improvements.

    Knowing your finances/savings/investments I would not accelerate the mortgage payments until you accomplish the above. Plus you are thinking of moving at some point so why tie up more cash in the house.

  3. #3
    I'd lean towards something like the roof replacement, for a few reasons:
    1. After the new roof is put on, it is likely that your homeowner's insurance costs will go down. (You can call your insurer and ask.) When we had our new roof put on, I was surprised by how much our insurance premium went down. Since you are going to have to replace the roof before your sell the house anyway, why not recover part of that cost in the form of reduced premiums for as long as you remain in the house?
    2. When the roof is replaced, the roofer may find other issues that need to be dealt with before you can put your house on the market. The sooner you learn about other issues the more time you will have to save for and arrange other repairs that need to be made.
    3. Give yourself a time cushion to make the best possible deal on a good quality roof. Get quotes when roofers are hungry for work. If you wait until just shortly before you want to list your house for sale, and a storm blows through your extended area creating lots of demand for new roofs, you are going to wind up paying top dollar for that new roof.

    On a separate note, remember that if you pay off your mortgage, you may be able to reduce your homeowner's insurance even more by raising your deductible. You will get to decide what your deductible is, not the mortgage company.

  4. #4
    Sounds like a real good problem to have
    Why don't you spread that money out and do all of the items you mentioned:
    * Stash some away for a new car.
    * Stash some away for the roof.
    * Pay extra on the mortgage principal.

    I know a lot of the investment savvy folks highly recommend putting extra money in the market vs paying off a low interest mortgage. I am a firm believer in getting your house paid for and living mortgage free as soon as possible. Once that is paid off, you'll have a bunch more every month to do something with, and the piece of mind is worth a lot as well.



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