Here is our current situation:
Savings rate 50%
$40,000 in cash savings
Maxing out Roth IRA, contributing towards pension (me), contributing up to employer match with 401K (husband)
$100/mo in a 529
Mortgage debt: $138,000 at 3.275%
Just opened an index fund at Vanguard with our tax return!
Monthly combined income of $7055 (after taxes, pension, healthcare, and 401K)
Future goals:
Pay off mortgage and use current condo as a rental to generate income within 5-8 years
Save an additional $30,000 for a down payment on a home within 5-8 years (savings account) - (“affordable” homes in our area are about $300,000)
Become FI within 10-15 years (continue maxing out IRAs and contribute towards index fund)
Question:
We have a total of $1750 per month to put towards the above financial goals. Plus and extra $9,000 per year that we make from side jobs, bonuses, etc. I want to divide that money between our mortgage, index fund, and our cash savings so that we can meet all of our financial goals, but I am not sure how to best divide that money between those goals. We already have $40,000 in our savings account earning about .5% interest so I feel silly continuing to stock money away there, but I don’t want to take a whole lot of risk with the cash needed for a down payment for the home we want to buy in 5-7 years. I’d be open to suggestions though, a CD would probably be a better choice for some of it or maybe bonds.
Our mortgage has a pretty low interest rate so I know it makes more sense to invest than pay it off, but in order to provide a bigger profit margin for when we do start renting out our condo, I would like to have it completely paid off. To me, it makes sense to completely pay it off because if you take our current mortgage payment, taxes, insurance, and HOA, then subtract it from the amount we would get renting, it only comes to $200 profit per month. If we have months without renters, maintenance, etc, we could very easily eat up that profit. With a paid off mortgage the profit jumps to $900 per month.
I want to be strategic about where our money goes, but right now it feels like I'm ambiguously assigning amounts to each goal.