Author Topic: What do I do with my left over funds?  (Read 4272 times)

MrD

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What do I do with my left over funds?
« on: August 01, 2012, 11:30:44 AM »
20% Pre-tax to 401k

Net take home monthly after tax/401k/etc - 2436

Expenses:

Mortgage: 1200(+450*) (overpaying to kill PMI) actual payment due ~1250, 3.75% fixed
Insurance: 111
Cable: 80
Electric: 60
Car: 50 - 3.49% fixed
Car Insurance: 60
Web Hosting: 10
Food: 210
House Fund: 100
Fun: 100
Gas: 50

Total Expense: 1931

Pre-Tax savings: 468

Left: 405

Current:

Owe ~2800 on car
Emergency fund - 11000
401k - 11000
Roth IRA - 5000

Job Situtation:

Very solid, I would say .05% chance of losing job in 1-3 years.

*Things to note - I have a live in girlfriend that pays 450 towards the mortgage so in total I am making 1650 payments. She also pays 40% of all utilities

I was thinking either putting the money towards my mortgage or putting more into 401k or even buying some employee stock purchase program which is at a 15% discount (my companies stock has more than double in the last year).

tannybrown

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Re: What do I do with my left over funds?
« Reply #1 on: August 01, 2012, 12:01:08 PM »
I think either of your choices are good ones.  Getting out of PMI might be a good goal, depending on how much it is monthly.

JohnGalt

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Re: What do I do with my left over funds?
« Reply #2 on: August 01, 2012, 01:00:50 PM »
I think either of your choices are good ones.  Getting out of PMI might be a good goal, depending on how much it is monthly.

Agreed - if you're going to go after getting out of PMI at all - why not go all in for it to get there as quick as possible?  You get 0 return (aside from lowering your interest payments on the mortgage) until you actually get there.

After that... Max out your Roth IRA, Max out your 401k, then pile everything else into whatever other investment vehicle you're comfortable with.  I'm always questionable on investing in company stock - it's just too much risk to have your current income and savings riding on the same company - but if there is an easy way to cash out that 15% discount to put into something else, I'd go for that before anything else. 

tooqk4u22

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Re: What do I do with my left over funds?
« Reply #3 on: August 01, 2012, 01:35:29 PM »
Take your e-fund and pay off the care ASAP, then reduce mortage to get remove PMI and even consider a refi to get lower rate.  Then max out 401k and other investments but if you can get discounted company stock at 15% discount and have the right/ability to sell it right away (i.e. no market risk) then do that first.

MrD

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Re: What do I do with my left over funds?
« Reply #4 on: August 01, 2012, 02:00:50 PM »
Thanks for the input guys, I think I will go with paying down the mortgage. I am actually working to get the interest rate down to 3.25 with a USDA loan now, I haven't closed yet.

As far as using my e fund to pay off the car, what is the point? I am sure my 401k or other investments will beat 3.49%. Any reason?

grantmeaname

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Re: What do I do with my left over funds?
« Reply #5 on: August 01, 2012, 02:03:42 PM »
You're not getting 3.49% with your emergency fund right now. If you wanted to compare it to anything, you should compare it to its current yield in your savings account, not to what you could earn if you were to invest it.

tooqk4u22

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Re: What do I do with my left over funds?
« Reply #6 on: August 01, 2012, 02:05:53 PM »
Yes but your e-fund is not your 401k and is likely sitting in an account earning nothing.  If you are saying your e-fund is invested then yes I agree - 3.5% is still good.  Also, it would be better to apply the extra payments to the car if you exceed the standard deduction as the 3.75% on the mortgage after-tax would likely be a lower effective rate.

MrD

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Re: What do I do with my left over funds?
« Reply #7 on: August 01, 2012, 02:06:54 PM »
Fair point but what I mean is that if spend 3k of my efund to pay off the car I will then have to save up that 3k again. That 3k I save up again could have been invested in 401k etc.

tooqk4u22

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Re: What do I do with my left over funds?
« Reply #8 on: August 01, 2012, 02:09:22 PM »
But is it invested now, or do you plan to invest that 3k now.  If not, then pay off the car. 

MrD

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Re: What do I do with my left over funds?
« Reply #9 on: August 01, 2012, 02:24:24 PM »
No it's not invested. My point is that almost everyone say to always have 6x in a e fund. If I spend the 3k I no longer have that.

I understand though that I should just pay off the car since its not invested and because there is almost no chance of losing my job.

tooqk4u22

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Re: What do I do with my left over funds?
« Reply #10 on: August 01, 2012, 03:21:50 PM »
Fair enough, but it would basically take you three months to restore the e-fund if needed (stop the extra $450 going to mortgage plus the $405 surplus), which if you really have no chance of losing your job in that period it is ok. 

Keep in mind that that the comments are based on a long term perspective and purely mathmatical one. Ultimately the amounts were talking about are inconsequential in the near term so you need to do what is most comfortable for you.