Clickbait headline of the month. Sorry, but I'm wasting way too much time trying to figure this out on my own and would love the help of this forum.
Basic Situation
-Wife and I are 31
-Kiddo on the way (March 2019)
-Wife will make about $45,000 next year (1/4 year off for taking care of kiddo)
-I just started my own law practice, and it is taking off beyond my wildest expectations. I have a steady $90-100k in hourly billing income, and then funds from settlements, which I basically treat as bonuses. Here's the thing -- I already have settlement checks rolling in for $42,000, $7,700, and another case (unless the case goes to hell) is going to be $30,000 minimum. I also just got referred two other employment matters as well.
-So, total income for next year will be about $250,000.
*Note: Prior to going out on my own, we've been making about $100,000 per year, saving about 30-35% per year.
Expenses
-Regular household expenses (year) = $42,000
-Business expenses (year) = $10,000
-Paid off my wife's car this year
-Paid off my car this year
-Paid off my wife's student loans this year
Assets
-House = $140,000
-HSA = $10,000
-Checking/Saving = $15,000
-401(k)s (combined) = $98,000
-Traditional IRA = $2,000
-Roth IRA = $23,000
-Cars = $20,000
Liabilities
-Mortgage = $114,000 (4.5% interest)
-My Student Loans = $159,000 (6.49% interest)
Net Worth
-$34,000
Options Moving Forward?
At this point, I feel like I'm in the great debate of whether to laser in and focus on a single goal (pay off the student loans), or be efficient, maximize tax advantaged space, and then pay off the loans.
Option A: I've been using REPAYE (student loan repayment) as a hedge to allow my life to progress to the point that I could make a high income and then kill these loans. (Google "Gaming REPAYE" to find my thread on this, can't link it here). That time is here much sooner than I thought thanks to my practice taking off.
I would love, love, love, to pull the trigger on these loans and kill them off in basically 14 months. That would require no retirement savings, which means higher taxes, but then also means just getting rid of these student loans.
And once I did that, I could turn around and crush the mortgage in ten months, meaning I would pay off $273,000 in debt in just two years.
Problem is that I absolutely suck at guesstimating income taxes given that I'm self employed, so I can't really get the math on how much the interest savings would compare to the tax savings, combined with investment returns on those tax-advantaged investments, etc.
Option B: The more efficient option, I believe, is to maximize all tax-advantaged space, and then dump the rest into student loans. This means maximizing my 401k ($53,000), wife's 401k ($18,500), and HSA ($6,900) before doing anything. But doing this means that it will take about 3-4 years to pay off the loans rather than a 14 month sprint.
Personal/Emotional Thought
My thinking in leaning toward Option A is strike while the iron is hot. As I said earlier, my wife and I are expecting here in March. I'm crazy, crazy, crazy excited about it, but I also know that I'd rather be pouring in the hours now rather than when he's playing sports and in school and all that.
Maybe I'm dumb and naive, but I'd rather work my ass off in my early 30s so I can coach sports and do all that fun stuff when my kids will really remember things.
Thoughts?
So what says the MMM forum? My heart says pay off the loans in a sprint. My head says maximize tax-advantaged space. I can't quite figure out the math, so I can easily be convinced here. Thanks for reading this far. Cheers.