Need Help - I'm making more money now than ever and I need to know what to do

[antoinette]

Hello,

My husband and I are looking for some financial advice. He makes enough money to cover our necessities and my online business is taking off where I'm now getting around $8,000/mo and I need to know what to do with this money.

We've maxed out my Roth IRA with $6,000 this year and opened a traditional IRA in my husband's name and maxed it out at $5,500 for 2018. We will probably add another $5,500 for 2019.

The only debt we have is the house which we owe $60,000. Our interest rate is 5.6% and we have 12 years left but I do plan on moving in two years. So my question is, should I try to pay off the house? Because I'm really not sure, I hate paying interest so I figure if I can go and aggressively pay off the house I will. BUT If it makes sense.

I also want to start planning for my kid's college fund (I have two kids 3 and 1) BUT I don't want to get stuck in an account if they don't end up going to college. Any plans you know of for a situation like this?

Basically, I'm making more money than I ever had and I want to be smart with it. So I would love to hear your advice on what I should do with all this extra money. 

[cincystache]

Congrats on the increase in income! That's awesome and a good "problem" to have. A few things to think about
1. Sit down with a good CPA and get some tax advice. Is it 8,000 in profit or sales per month? Make sure you are keeping good books and taking advantage of all your available deductions. Also ask about a SEP IRA or solo 401k.
2. If your husband has access to a 401k you should consider maxing that out (19k per year).
3. Max out your IRAs, ask your accountant which style you qualify for (Roth, traditional, backdoor Roth?)
4. Max your HSA if you have one
5. Pay off the house. Your interest is high enough and your timeline short enough that it makes sense to knock it out now.
6. College savings can be done in either 529 accounts or with taxable savings. I personally think 529s are vastly overrated for the majority of people unless you are in a high tax state and get a deduction..

What is the nature of your business?

[MDM]

antoinette, welcome to the forum.

You might find the suggestions in Investment Order worth considering.

[antoinette]

Thank you so much. I run a blog and it has done very well in a short amount of time. $8,000/mo. is profit but it's pretax so I'll need to deduct about 32%. My husband's job does not have a 401k unfortunately or HSA.

Ok, so you think we should go ahead and pay off the house. Thank you! This is what I was really wondering. Thank you so much for answering my questions!!!

MDM - I"m going to check out the investment order. THank you so much!

[MDM]

$8,000/mo. is profit but it's pretax so I'll need to deduct about 32%. My husband's job does not have a 401k unfortunately or HSA.

Have you looked into a Solo 401(k) plan?

[SuperSecretName]

5.6 is pretty high - I'd knock some of that out.  If you are planning on moving, not sure it makes sense to refi.  You aren't going to beat 5.6% that guaranteed return.

At the same time, I'd look into opening a HELOC now if you don't have one.  That way if something goes wrong, you can easily access the funds that you are paying down the mortgage with.  If nothing else, it's a good place to park the money for a while.

[YttriumNitrate]

I also want to start planning for my kid's college fund (I have two kids 3 and 1) BUT I don't want to get stuck in an account if they don't end up going to college. Any plans you know of for a situation like this?

Currently, something like 70% of high school graduates go on to college, so assuming that both of your kids graduate high school there about a 9 out 10 chance that at least one of them will go on to college. I'd suggest that you start working on a college fund that will cover one of them. By the time the fund is large enough to fully cover one kid, you should probably have a much better idea if you should make it big enough to cover both kids.

https://hechingerreport.org/more-high-school-grads-than-ever-are-going-to-college-but-1-in-5-will-quit/

[SuperSecretName]

Like the above poster, my plan for college of two kids is to save half (of stateU) for each in a 529. That way if one doesn't go, the other will get it.  If they both go, fund normally.