Sold a toy I wasn't playing with... what to do with the money

[ncornilsen]

One of my hobbies involves working on my classic car - basically swapping corvette suspension under it. during the initial phases of this project I bought a CNC milling machine to make a bunch of parts for it. But, for the last year, I've had other priorities and haven't worked on the car much, nor will I need the CNC machine alot from here on out... So, I sold it. Long story short I got $4500 for it. I'm trying to determine the most mustachian thing to do with the spoils...
Current debt is as follows:
3950 @ 6.9% student loans, 56/mo
4250 @ 7.4% student loans, 72/mo
4930 @ 3.4%, Motorcycle, 140/month
192,000 @ 4.5%, house, 30 year fixed. House value is ~220K
2200 @ 0% for another 16 months, I'm using this to build an addition on my house.
I have $4700 in a 1% APY savings account. 

I currently put $620 a month into a stock purchase program that returns, at a minimum, 15%, and at best, 15%+ stock appreciation. I won't have access to this until jan 1, 2014. The plan was to use that to pay off the student loans.  I am using the 0% card to build an addition on the house. (Doing 99% of the work myself.)  I would hang onto the $4700 in cash 'till the project was done, then pay it all off. I add $800 a month (rent income) plus ~1200 quarterly (bonus) to the wad of cash for the addition, so by october, I'll have enough cash on hand to pay for all but a few thousand of the addition.

So, should I hang onto this cash as an emergency fund (1% APY return)
Kill the motorcycle loan (3.24% return, and frees up $140/month), roll than $140 a month into the other student loan...
Kill one of the student loans (7% return, but only frees up 72 a month) and put that extra money against the other student loan?  It doesn't free up the cashflow as much, but does eliminate a higher interest loan. And in 7 months I'd get that money back anyway to finish paying it all off...

Or, should I use it to start a vangard index fund? Seems like the debt I have is the same as average returns on one of these, and is gauranteed... so this isn't as attractive.

[innkeeper77]

An index certainly isn't a guaranteed 7%, so I would personally kill off the student loan. It doesn't free up cashlow, but long term it frees up real cash! If you are able to pay your bills, the cashflow shouldn't be an issue anyway. High interest debt is, as Mr Mustache says, an emergency- kill it off! Dont forget investments, but that can come after you have less extremely high interest debt.

[mpbaker22]

An index certainly isn't a guaranteed 7%, so I would personally kill off the student loan. It doesn't free up cashlow, but long term it frees up real cash! If you are able to pay your bills, the cashflow shouldn't be an issue anyway. High interest debt is, as Mr Mustache says, an emergency- kill it off! Dont forget investments, but that can come after you have less extremely high interest debt.

Yep, easy choice.  Kill the student loan.  You'll be saving a lot more in interest than would make the extra cash flow worth it.  and you can use the extra $70/month to kill the 2nd loan much quicker than vice versa.

[Self-employed-swami]

I am also going to chime in here, thirding the suggestion to put it on the 7% student loan!

[snellbert]

Another vote for the 7% student loan.

[ncornilsen]

Done.

A loan dies tomorrow. May it rest in peace.

[cerberusss]

Way to go man! I think many people would be jealous about wiping out a $4250 debt in one fell swoop!

[gooki]

Just out of interest have you looked into refinancing you home. 4.5% seems high for someone in the US.

[gooki]

3950 @ 6.9% student loans, 56/mo...
I have $4700 in a 1% APY savings account. 

And your not paying off you other student loan at 6.9% because???

[Bigote]

A loan dies tomorrow. May it rest in peace.

LOL, and congrats!  Nothing like putting a bullet between the eyes of a debt.

[ncornilsen]

3950 @ 6.9% student loans, 56/mo...
I have $4700 in a 1% APY savings account. 

And your not paying off you other student loan at 6.9% because???

Having 4700 in liquid cash sitting around makes me feel better?
Perhaps I should consider the $20,000 in unused credit card balance as the cusion as my e-fund and take the 6.9% return on the 4700 in the mean time?

[arebelspy]

3950 @ 6.9% student loans, 56/mo...
I have $4700 in a 1% APY savings account. 

And your not paying off you other student loan at 6.9% because???

Having 4700 in liquid cash sitting around makes me feel better?
Perhaps I should consider the $20,000 in unused credit card balance as the cusion as my e-fund and take the 6.9% return on the 4700 in the mean time?

If your job is stable, and your life doesn't have lots of liabilities (kids, danger, etc.), and you can still sleep at night doing this, yes.

[ncornilsen]

Just out of interest have you looked into refinancing you home. 4.5% seems high for someone in the US.

I did, but I currently don't pay any PMI on that loan. Re-financing would consume all the savings of re-financing, and I don't plan to keep the house long enough for the PMI to drop off.

[Zaga]

I would keep a little bit of liquid cash around.  Emergencies happen, and they can take many forms.  Also, you have a rental, there's an additional source of potential emergencies over there.

[lizzigee]

Congrats on your decision to pay the 7% student loan. I'd then use the last $250 left over from your sale plus $3700 from your savings a/c to clear the other student loan. This would still leave you $1000 in savings for a little peace of mind, (plus that unused $20K credit card balance if there's a real emergency). 

You could then start building up your emergency fund/savings account again using the $128 per month you no longer have to pay for your student loans. In 16 months when interest becomes due on your 2200 loan you would be at the oint of being able to utilize your savings again to pay that off if you wished, and still leave a thousand in savings.  In the meanwhile you've had the reassurance of having that cash backup if the s**t hits the fan anywhere.

[ncornilsen]

Congrats on your decision to pay the 7% student loan. I'd then use the last $250 left over from your sale plus $3700 from your savings a/c to clear the other student loan. This would still leave you $1000 in savings for a little peace of mind, (plus that unused $20K credit card balance if there's a real emergency). 

You could then start building up your emergency fund/savings account again using the $128 per month you no longer have to pay for your student loans. In 16 months when interest becomes due on your 2200 loan you would be at the oint of being able to utilize your savings again to pay that off if you wished, and still leave a thousand in savings.  In the meanwhile you've had the reassurance of having that cash backup if the s**t hits the fan anywhere.

I think that's a good idea. As it stands, I also have $3200 (so far) in a stock purchase program, which if I -HAD- to have bad enough to forgo the minimum 15% return on jan 1, 2014, I could cash out at any time. That's what I was planning to use to end the student loans next winter... but I just looked at my statements again... holy crap nearly 40% of my payment is just interest... so delaying is an expensive luxury.

[lizzigee]

I know it's tempting to splurge a little of your sale money, but you know the killer bees, hair on fire scenario? That's you at the moment.  I know because I've been there.  Except it was massive business borrowing. When things were going well it wasn't scary and repayments weren't a problem. But things don't always go to plan. Get rid of the debt while you can because you never know what's around the corner. The sense of freedom when you no longer have all these debts (even if not very large ones) hanging over your head will be awesome.