Hi Everyone,
First, a heartfelt thanks to MMM and this Forum for radically changing the way I understand things. Now I grasp that money is for making more money and for investing for freedom (not buying objects!).
This enlightenment is very liberating! Thank you!
Although we were relatively frugal before (12 year old Corolla, bicycles, etc.), in the post-Mustachian era, we now clamp down on mindless expenses, max out our 401K’s, use YNAB; scorn clown cars, plan to take on a border, and think about downsizing our house, etc.
We recently gained some money from selling a home. We should invest this money.
And this is where we are hoping to get advice from the Mustachians.
Here is our situation:
We have $60,000 saved in the bank.
Our normal monthly salary income is about $6,300.
Our monthly living expenses are about $4000.
We pay $1,600/month mortgage payment on a 15 year note now worth $141,000, for which we pay 2.7% interest.
We have a $50,000 student loan debt at 4.875% interest for which we pay $368/month.
Other than the mortgage and the student loan, we have no other debts.
We max out our employer’s 401k retirement plans.
I am 51 years old. My wife is 46.
We would be very grateful for advice about how to go forward.
Specific questions:
a) How much should we put aside for an emergency fund?
We have access to credit cards that we could tap in an emergency; we could open a HELOC. We can also borrow against our retirement accounts at a relatively low rate of interest.
So what’s the least amount we could reasonably save for emergencies?
If we invest money in the stock market (say Vanguard), how easy is it to get that money back in case of an emergency? How quickly could one pull emergency money, e.g. $25,000, back out of the market, if necessary?
b) How to invest the remainder of our $60,000 that we don’t save for emergencies?
From reading MMM, we understand that Vanguard Index funds are the best way to go.
But apparently there is more than one such fund.
This seems in part to have something to do with allocation, but I don’t really understand how to think about allocation.
So please help a late-blooming Mustachian—
How much of our $60,000 should we invest? How much should we keep for emergencies? And which Vanguard fund do you think should we use, and why?
Thanks so much!