I know I must be the millionth person to post a thread like this, but hopefully some of you enjoy working on people's financial puzzles. So here's our situation:
Unmarried but long-term partner, I'm 32 she's 36. She has a high income (130K), and I'm trying to get a business off the ground, so income is incredibly one-sided right now. She has a 401K (no employer matching) that probably only has 10K in it, a Roth IRA with 11K, and High Interest Savings at 11K. I have nothing yet.
- Combined student loan debt - appx. 290K (woohoo!)
- Mortgage - 289K @ 3.5%
- Consumer debt - 0
- Vehicle - Owned outright
- We live in the city, so no commute (bike and/or public transportation)
- We're in the process of cutting costs as low as possible, but given the mortgage and student loan debt, it keeps expenses high enough that saving in amounts advocated by MMM is not possible. Those two expenses alone consume over half of net income, and I'm barely paying on my portion right now since I'm on income-based repayment. So I'm currently just piling up even more interest. Oy.
So I have a few questions in terms of priorities -- what should we dumping most of our money into at this point? I assume student loans since they have the highest interest rates, but there's one issue with the house I wonder about:
On top of the mortgage, we're on the hook for PMI at a whopping $298 a month (yeah yeah, I know - if you're tempted to lecture you can skip that part). We have an opportunity to add value to the house, so I'm wondering if in the short term we should put money into the house (both improvements and curtailing the principal) and try to find a refi where we can get rid of the PMI? We probably can't get to an 80% LTV with that alone right away, so this could theoretically happen sooner with an 80/10/10. Would this even be worth it to avoid the $298 PMI? I suppose this depends entirely on the rates we could get. Or maybe it makes more sense to just get the house to 80% ASAP via curtailment and then refi then?
There's also an external space that we could theoretically turn into a micro apartment (240 sf) and rent for maybe 400-500/mo., but that would require dumping money into. Obviously we could recover it in a few years, but I'm not sure if something like that would help us with a refi deal.
Aside from that, I assume she should be putting her money into a Traditional rather than a Roth, correct? Her financial advisor advised her to put into Roth, but that makes no sense to me at her marginal rate. I realize now that I think he assumes her income will rise indefinitely and that she aspires to live a richie-rich lifestyle in retirement. Not our desire. Or, perhaps aside from accruing a safety net, should she not even put money away at this point and instead dump everything into paying down debt?
Just trying to put together a smart game plan and I'm new to this. Any advice would be appreciated. Thanks y'all.