#FinancialAdvice #Investing #Mortgage #SavingAdvice
Hey everyone! 👋 I’m in a bit of a financial dilemma and could really use some advice. 💸 I’ve got some extra cash each month, and I’m not sure what to do with it. Here’s where I’m at:
– No debt except for my recently purchased house 🏡
– $1000/month going into my 401k 💼
– Emergency fund of 10k 💰
– Able to save an extra $1500-2000/month 📈
I’m torn between investing in stocks, getting CDs for a guaranteed return, or putting the money towards my mortgage principal. 🤔
Do you think I should diversify my investments or focus on paying off my mortgage to drop the PMI? What would you do in this situation? I could use all the advice I can get! 🤑
Consider paying off mortgage interest to reduce long-term debt, not just principal.
I’d start paying yourself a car payment into savings to be prepared for when it is time for a new car, and I’d pile the rest onto mortgage principal (and keep going past the 20% amount).
6.5% on the mortgage is steep to be going into Conservative investments like a CD. Should just pay off the house in trade.
If your projections are good on retirement with conservative expectations in returns then forego that route (but more would never hurt!)
I’m similar in size of emergency fund, seemingly super stable job. I’d rather believe in sticking spare cash in a brokerage. Time in the market will put you ahead enough to keep from selling at a loss for vacations, repairs, cars.
My ratio is probably closer to 2:1 tax-advantaged:brokerage. Not 1:1 or 1:2. But again those numbers are based on the lifestyle I want in retirement vs lifestyle I want now. It’s your life. Adjust accordingly
10k seems like a pretty light emergency fund, but I am conservative by nature with stuff like that
Here is the generally recommend order to invest.
1. 401(k) to maximize the company match
2. HSA (if you are eligible)
3. Roth IRA
4. Maximize 401(k) contributions
5. Brokerage account
A few other questions.
1. what is the interest rate on the house?
2. What are your monthly expenses and how many months worth of expenses does that $10k cover? It should be at least 3 which is the rule of thumb. I personally recommend 6 months if you can afford it, but that’s totally a personal choice.
3. Are you planning on any other big purchases in the future such as a car purchase, a big vacation, home renovations, or anything like that?
Consider a balanced approach by allocating your extra cash across different investments, such as a combination of ETFs, CDs, and additional mortgage payments. Diversification can help manage risk and optimize returns.
If your priority is to eliminate the PMI portion of your mortgage payment, focusing on making additional payments towards your mortgage principal until you reach 20% equity may be a good strategy. Once you eliminate PMI, you can redirect those funds towards other investments.
Identify your long-term financial goals, such as retirement, saving for a major purchase, or building wealth. Align your investment strategy with your goals to ensure you are on track to achieve them.