Where should I focus this bonus money towards?

[FIREfox]

Hey all, I don't think this warrants a full case study post but wanted others' takes on things.

My wife and I are mid-30s with a 5 year old. We both work and together earn around $195K gross. Annual bonuses are typically around 10-15% of that. We just got word that our combined bonuses will be around $35K gross this year - arriving in the coming weeks.

We've currently got about $17K in liquid savings, $189K in retirement plus a small amount in each HSA.

Debt-wise we've got $160K remaining on our mortgage at 3.625% and $32K of student loans remaining at 4.93%

Upcoming purchases: I'm firmly team one car but my wife is returning to the office a couple of days a week and is insisting that we'll need a second vehicle now that our kiddo will be starting sports and other activities, and for days where weather's bad and riding my bike to pick him up from school won't be viable. I'm not fully sold on it yet but if we end up going this route would like to pay cash of course.

Really psychologically motivated to eliminate that student loan debt immediately but we have yet to contribute to our Roth IRA for 2023. Last was $6K each in early 2022.

Am I overthinking things? Should I just wipe that debt out as soon as possible? If it were like 7% the answer would be more clear in my eyes but I'm not sure at 4.93% with the interest being tax deductible, and wanting to keep decent savings available and contribute to our Roths again for this year.

Appreciate any insights.

[nereo]

Yes, dont over think it

I would apply that $35k in the same manner as you would apply your normal compensation- following your AA and IPS (if you have them, which is always a good thing to have).

As always the Investment Order stickie is a great guideline

Why are you not maxing out your HSA if available to you? That’s by far the most beneficial bucket most people can fill.

[lucenzo11]

Here's the link to the Investment Order: https://forum.mrmoneymustache.com/investor-alley/investment-order/

Some questions:
1. Is your $17k you emergency fund or do you have your emergency fund elsewhere and this is other cash on hand? If this is your e-fund, is this sufficient for you?
2. Are you contributing the max to 401k? HSA?
3. I know this isn't a full on case study, but do you have excess money leftover on a standard month? I ask because if you were to pay off the student loan debt completely, you are implying that you might not contribute to IRA this year.
4. What is your monthly payment on the student loans?

When in doubt, stick to the order of investments which says do not pay off student loans right now. That being said, I also hate student loans with a passion and paid off mine as quickly as I could even though some of the last ones had low interest rates. So pending answers to my questions, you probably have other things you want to address before attacking the student loan. The car piece is a big question mark too.

[FIREfox]

Why are you not maxing out your HSA if available to you? That’s by far the most beneficial bucket most people can fill.

Yes, thanks - just updated our elections to max it.

Here's the link to the Investment Order: https://forum.mrmoneymustache.com/investor-alley/investment-order/

Some questions:
1. Is your $17k you emergency fund or do you have your emergency fund elsewhere and this is other cash on hand? If this is your e-fund, is this sufficient for you?
2. Are you contributing the max to 401k? HSA?
3. I know this isn't a full on case study, but do you have excess money leftover on a standard month? I ask because if you were to pay off the student loan debt completely, you are implying that you might not contribute to IRA this year.
4. What is your monthly payment on the student loans?

When in doubt, stick to the order of investments which says do not pay off student loans right now. That being said, I also hate student loans with a passion and paid off mine as quickly as I could even though some of the last ones had low interest rates. So pending answers to my questions, you probably have other things you want to address before attacking the student loan. The car piece is a big question mark too.

1. Yeah I would consider the $17K inclusive of our emergency fund. I don't like to let it get under $10K. I think I'm comfortable around that.
2. Based on latest updates, maxing HSA and contributing 15% each to 401K.
3. We could probably be tracking expenses more closely but in general unless we're making a big planned purchase or an emergency comes up, our savings is growing consistently (we each were contributing about $800 every other week to it). If we eliminated the student loans, it would probably just mean putting that Roth money in later in the year rather than sooner.
4. Minimum is about $870. We were paying about $1K. I'm thinking of dropping that to the $870 again to ensure we're able to hit those points higher in the hierarchy of the investment order.

[Duke03]

I side with your wife and will agree you need a 2nd car.  Trust me I have two kids that do multiple sports play instruments etc.  My wife is a stay at home mom and I'm around the house a lot and we still need to have Grandma pick up a kid here and there due to conflicts in schedule etc. As kids get older it only gets worse.  As far as the money goes, I'd pump that emergency fund up to about 25k and maybe try to knock out the student loan debt by the end of the year for sure.

[jac941]

I agree with the advice to stick to the investment order.

Re the car, if you live in a bikeable area, consider holding off and see how it works. We are 2 adults with 2 kids at two different schools (neither provides transportation) with multiple days a week of activities each. I work full time from the office and I have to drive for work sometimes. My spouse works full time from home. It is a bit of a puzzle to make things work, and someone has to bike in the rain or take Lyft occasionally, but even with the Lyfts, it’s still far less expensive than owning a second car. Also far less headache - one less car to smog and register, one less car to take to the shop, one less thing in my life to maintain.

Not having a second car also forces you to talk to the other families and try to work out carpool & bike pool situations. Getting into a good carpool / bike pool swap is good for everyone.