I'm looking for advice on which of our goals to accomplish first from a financial standpoint and if our targets are appropriate. I'm trying to give enough detail without being overwhelming. Happy to edit my post with more detail as necessary.
I'm not doing a full case study because we're both pretty comfortable with where our spending is at and we track it carefully. Normal monthly spending is $2,500 not including debt payments. Either one of our incomes wold be enough to cover living expenses and debt payments without touching savings.
Married couple - me - 33, husband - 32, no kids yet but trying. Combined income - $195,000 gross. Includes each of our jobs ($108k and $87k) and the net income from our rental property ($9k).
After taxes, insurance, maxing out both 401ks and Roth IRAs, we are at $101,000 net. We live in a high tax state.
In all of our taxable accounts we have $127k + $10,000 in an HSA. (We no longer have the type of insurance that allows us to put new money in the HSA. At this point we treat it like an extra retirement account/emergency fund, haven't touched it in years).
Net worth with property is $493k. We have our primary residence and one rental property.
We have 3 debts:
Rental property mortgage: 4.85% interest - $71,000 total left - monthly payments $545
Our home mortgage: 4% interest - $182,000 total left - monthly payments $1500 (this includes a bit extra)
Student loans - 3.1% interest - $53,000 left - monthly payments - $600 total, we only pay $300 - My parents pay the other half.
We use a credit card for all our expenses and pay it off every month. Neither of us have ever had any credit card debt.
Obviously given our incomes we still have money left after maxing out our taxable accounts and making debt payments. Both properties are worth much more than the mortgages.
Here are some of the things we are working toward financially on the way to FI:
1. A little bit will come off the top of savings for my husband to get a car. His car is 14 years old, pretty smashed up (but still legally driveable), with 200,000 miles. We've agreed that the next time it needs major repairs we're just going to scrap it and get something else for him, no point in continuing to pour cash into it. Obviously we'll pay cash and it clearly won't make a huge dent in our over all savings. He is able to bike to work sometimes but some days needs a car to drive customers/guests around.
2. Obviously we need to keep a bit aside for emergencies. Given the fact that we have 2 incomes plus rental income and very low expenses, we would feel comfortable with $15,000 in emergency savings as cash plus the $10,000 in the HSA. Other savings could be in investments that we could sell if we had exhausted all other resources in a dire emergency. That cash would cover 6 months of expenses if necessary. I'd prefer a larger cushion but I'm trying to be unemotional about it. Is this enough emergency savings as cash?
3. We put $250 into one of our savings accounts every month to pay for major house repairs and appliances someday. There is $13,000 in that account right now but we're probably going to cap it at $15,000. That's more than enough for a new roof when it comes up. This is a strategy we read about a long time ago and it makes logical sense to us - to have money set aside for expenses you know are coming at some point. However, I'm not married to this particular strategy or savings rate. Do people have thoughts on the strategy or amount?
4. While I don't like having the student loan debt, the interest rate is very low and we only pay $300 per month toward it. If we did, we'd be giving up the "free" money from my parents making half the payments. They are perfectly willing to keep making the payments but don't have any interest in putting a lump sum forward for half. Does it make any sense to pay this off?
5. Does it make sense to take savings and pay off either of the mortgages? So far our thoughts have been that our annualized rate of return on our investments is much higher than our interest rates on debt. Also, given our high incomes we could really use the tax benefit of the mortgages.
6. We'd like to purchase another rental property and are looking at duplexes+. We think we would need around $30k - $40k for a down payment.
Should we prioritize paying off any/all of the debts or buying another rental property?
I'm interested to hear what everyone has to say. We've talked about all of the above pretty extensively and can see pros/cons to every option.