What would you do with this part time income?

[$ hoarder]

I expect to take in approximately $15k in the next year from a new part time job I picked up. What would you do? I'm 29, EF is funded, fund our Roths to the max each year, contribute 14% to 401ks (husband is maxed out at the 17.5k limit, I have a little room). Net worth approx 360k. Debts: 186.5 Primary house (15 yr at 2.75%), 123k on rental 3% mortgage we plan to sell in the next two years, 17k SUV loan (2.49%, one year old, plan to keep for many years), 32k truck loan (2.24%, husband likes to change cars all the time so i don't see a point in paying any more on this when he may trade it in)...also, we have our first baby on the way so not sure how to budget that in yet.

Options we are considering:
1. Pay off SUV loan in one year.
2. Save one years worth and re-cast mortgage to reduce monthly payments and principal (mortgage co OKed this with no fees)
3. Invest in brokerage account.

I get that logically given my age it probably makes sense to invest and take advantage of higher rates of return but it sure would be nice to pay off the car or chip away at the mortgage. What would you do?

[Jerry91]

In my opinion, it will be better to pay off the SUV loan with that amount. You will be able to get rid of one of your debts easily.

[dojo]

As long as your EF is funded, I'd put the money to speed up paying the car. This will then leave you more 'room' for the mortgage payment.

[puffLife]

My choice would be is to pay for necessary bills needed in the maintenance of that car, and save money for future use.

[feh]

Not enough info.

1. Is your net worth really $360K, or is that what you have saved/invested?
2. What are your current investments, and in which accounts?
3. What is your household income?
4. Do you want to retire early?

[Chris Leese]

I would either (1)payoff the SUV loan and then direct the money that was being used for that monthly payment to savings/investments or (2) invest the money if you are comfortable that you can earn a higher return than interest costs on the SUV loan.

Raising a child is expensive so you probably should start thinking about saving/investing for the associated costs.

[TheKayla]

I'd say up the payment on your SUV, but split it between that and saving more liquid funds for when baby arrives. If you've found you've saved 'too much' when you get into the swing of things when the baby does arrive, you can allocate more towards the SUV loan. While you'll need some liquid savings for that, at the same time, the fewer payments you have the better.

[J.Apple902]

529 plan should be a part of your picture right?

your loans have such low interest rates that their adjusted (to inflation) rate is basically 0%. That being said, you really can do whatever you want. Invest more. Stash more for the baby, pay towards debt, whatever you want. I definitely want to emphasize the fact that you have good flexibility without staggering interest rates.

[snafu]

You're doing great! I wish everyone in your age group managed their finances as well as you two do! I'd set aside $ 1.5K as baby's slush fund and DCA the rest in a regular a/c at Vanguard...perhaps Dividend Fund depending on existing holdings.

If you decide to buy a 529 Fund for baby read and fully understand the small print. You must know the particulars on what that investment allows as expense since some are so restrictive.

[LivingAlmostLarge]

Are you planning on keeping second job after baby? What about not having two incomes after kid? Some variables might clear up what to do.

[$ hoarder]

feh:
1.Is your net worth really $360K, or is that what you have saved/invested? Net worth (Assets-debts) We have about 200k in retirement, 5k in investments (just started), and 40k cash
2.What are your current investments, and in which accounts? Mostly aggressive mutual funds (401ks,
3.What is your household income? Not sure this matters?
4.Do you want to retire early? That would be nice but trying to be realistic about what that would look like. I'm a saver out of fear. I've seen my grandparents live longer in retirement than in the workforce and now my parents are picking up the slack even though they will have little to retire on. I'm hoping to learn from their mistakes and get an early start. My husband and I have also discussed working part time when we get around to baby #2.

LivingAlmostLarge: Are you planning on keeping second job after baby? What about not having two incomes after kid? Some variables might clear up what to do. Right---not the best timing to pick up a new part time gig but the plan is to keep it (it will be during my free time, all at home). The plan is to have both of our normal incomes with the addition of this part time piece.

[$ hoarder]

Sorry, when baby #2 comes (2 years?) I would work two part time jobs (Ideally--new part time, and part time at the current full time job). He would stay full time.

[feh]

feh:
1.Is your net worth really $360K, or is that what you have saved/invested? Net worth (Assets-debts) We have about 200k in retirement, 5k in investments (just started), and 40k cash
2.What are your current investments, and in which accounts? Mostly aggressive mutual funds (401ks,
3.What is your household income? Not sure this matters?
4.Do you want to retire early? That would be nice but trying to be realistic about what that would look like. I'm a saver out of fear. I've seen my grandparents live longer in retirement than in the workforce and now my parents are picking up the slack even though they will have little to retire on. I'm hoping to learn from their mistakes and get an early start. My husband and I have also discussed working part time when we get around to baby #2.

Regarding #3 - I'd want to know what your savings rate is before I give advice. I'd also like a list of all retirement accounts and their balances, the value of the houses, and what you owe on them.

If you don't want to divulge that info, I understand. I just don't want to dispense advice without a clearer picture of your finances.

[cardtrick]

Considering the interest rates on your debt, I see no reason to pay any of it off early. It is quite tempting for me to make extra payments on my mortgage too, and my rate is 3.75% on a 30 year. 30 yr bonds are currently yielding 3.61%. Assuming the taxes i pay on the coupon payments cancel out the tax deduction I get on the mortgage interest, I'd be better off not making any extra payments if rates rise past around 3.75%. The consensus is that rates will be much higher 5 years down the line.

Also note that you still get 100% of the upside even if you don't make any extra payments. Sort of a leveraged bet on housing. And if house prices drop a lot again, you would regret having lost all that equity and being cash poor. I'd much rather have negative equity in the house and lots of cash in the bank.

It's only a psychological thing - having the house paid off. It's not like they can raise the interest rate on you. If I can figure out how to borrow money for 30 years at 3.75%, I'd borrow as much as I can. I wouldn't even think twice if someone offered me $100 million for 30 years at those rates.