What to do with 40k?

[jier]

Hi All,

I'm new - this is my first post. A little background on us... My husband and I are in our late 20s/early 30s with an 18mo daughter. My husband just finished school for a second degree in Electrical Engineering in May last year and was hired in October. I am a civil/structural engineer and at the end of Jan I left my engineering/design software job after 8 years to stay at home with our daughter until she (and any others TBD) are school aged. Selling my vested stock options, our tax refund, my espp contribution return, and whatever we had left in savings after taking a loss on our house sale and moving across the country is about $40k.

While my husband's salary is decent for entry level, it's not as much as I was making. His income will pay our current bills, and I have a part-time/at home job for our spending money. We own a very small townhouse now since we thought I may end up leaving work. We want to get on the right track to buy a house again.

With 40k we could pay off one of our cars, our credit card, and take the loss on selling a small travel trailer we have payments on (and eliminate the monthly storage fee). Then we could just very slowly keep working on our student loans. Is that a good plan, or should we be trying to put that 40k somewhere to make some sort of interest off of it and just keep making our minimum payments? It is a large sum of money to us so we just want to try to be smart with it!

Thanks for any advice in advance.

[kork13]

I think that plan is just fine. What interest rates are all of those loans currently at? The credit card debt definitely needs to go. Clearing the trailer (and eliminating the monthly storage cost) is also a good idea. Beyond that, I would just take the highest-rate loan & work your way down from there. Depending on exactly how much debt you have, this $40k could take you from being deeply in debt to being nearly debt-free within a fairly short time period. But however you end up using it, debt elimination is definitely a very solid plan, regardless of the order in which you do it.

[TBH]

You didn't mention any savings. Do you have an emergency fund? If not, I'd save some of the $40K as an emergency fund, to keep you from going into credit card debt again. Otherwise I agree that paying off car debt, credit card debt, and getting out from under the trailer all sound like good uses for that money.

[bjl584]

Getting rid of debt is always a good idea, but as the previous poster stated, do you have any other savings besides the $40K.

Also,
how much debt do you have? How much would you have left over if you paid off everything?

[snafu]

You've not mentioned a retirement plan. Was the ESPP that you're cashing in for retirement? Will it have any penalty or tax consequences? Has DH joined an employer's retirement plan, at least for any match? I too believe it's imperative to have an Emergency Fund. I suggest opening an on-line saving account like Capital One, Ally or your preference with a 1K initial deposit. Keep adding to it each pay until it will cover at least 3 months of bare bones living expenses imagining DH was abruptly laid off.

What interest rates are you paying on Mortgage, Student Loans, cars #1, #2 and Credit Card? Is your CC balance transferable to a no fee 0% interest card? I suggest that you take time to work out best outcomes using various scenarios. 1st create a budget and use a on-line debt calculator to work out options. Often it's best to rid yourself of the highest interest item. A secondary issue would be the willingness to control spending and making the commitment going forward that CC will be paid in full every single month.

http://www.bankrate.com/calculators/credit-cards/credit-card-payoff-calculator.aspx

Unless you are in a 'full of snow' area, I suggest you ramp up effort to sell your travel trailer to rid yourself of payments and storage fees. Run photos and description on CraigsList, the manager of the storage facility, bulletin boards at any camper supply store that permits adverts and any free site you can think of. At 1st signs of spring you can consider running an ad in Auto Finder's RV edition. Does your local WalMart allow people to showcase their RVs/holiday trailers to sell on their lots?

What do you think?