Payoff house early or Bank Money

**disneysteve** · 12-10-2011, 07:31 PM

I would not prepay the house. You have more important financial needs. You need to build up your EF. You need to get rid of credit card debt and student loan debt. You bought a car you couldn't really afford so I'd work on paying that down. Cut down your grocery bill and eating out. Trim your cable bill. Boost your retirement savings rate.

Prepaying the mortgage should only happen after all of your other financial needs are taken care of.

**minnie1928** · 12-10-2011, 09:42 PM

I agree, the house is the last thing you should be paying down. I would pay off the CC, then student loan, then the car. After that, start piling cash into your emergency fund.

Cut your other expenses. The amount that you are saving for retirement is the same amount you are spending to eat out each month, that's a priority issue right there.

Take as much OT as you can get/handle. The more excess cash flow you generate (via increased income or decreased expense), will make this process much easier and faster.

**JenniferG** · 12-11-2011, 06:25 AM

Thank you both for the advice. At this time I will continue to make my 1100 dollar mortgage payment with 40 going towards princible but not allocate any additional money from my tax refund. I'm thinking my refund will be 2500 for taxes and 1700 for the Mortgage Credit. By the time I recieve my refund my credit card should be paid off I'll use the 1700 towards my student loan and then the 2500 dollars will go into my emergency fund account making it around 6200.

Question:
1. Being single what do you think a reasonable emergency fund would be for me? I was thinking 10k but thats no where near 6 months of living expenses at this time, however if I had to I could trim my budget considerably and I could probably make it stretch for 4 to 5 months.

2. I've been considering getting mortgage insruance where they pay your mortgage in the event of disability or loss of job since I'm a single income household. What do yall think of these, are they scams? Would it be better to just keep increasing my EF?

(Side note Highjacking my own thread here)
Minnie. I went back and looked at my paystub and I'm putting in 8% of my pay which equals roughly 350 dollars a month and my job is matching 5% at 200 dollars a month so at this time I have 550 dollars going towards my 401k. I read recently that you should only match what your job
matches which for me would be 5%. After that your funds should be allocated else where because the stock market at this time is so unstable. HOWEVER I have atleast 30 to 35 years before retiring so that is a huge factor in where my money should be going. Correct?

**disneysteve** · 12-11-2011, 07:31 AM

Originally posted by JenniferG View Post

I'm thinking my refund will be 2500 for taxes

Adjust your W-2 on Monday to prevent this going forward. That's $200/month that you are overpaying just to get it back later with no interest. Better to have that money in your pocket each week to pay down debt and boost savings.

Question:
1. Being single what do you think a reasonable emergency fund would be for me? I was thinking 10k but thats no where near 6 months of living expenses at this time, however if I had to I could trim my budget considerably and I could probably make it stretch for 4 to 5 months.

I think for now, a 3-month EF is a great start. Once you are debt free, you can boost it up to 6 months worth.

2. I've been considering getting mortgage insruance where they pay your mortgage in the event of disability or loss of job since I'm a single income household. What do yall think of these, are they scams? Would it be better to just keep increasing my EF?

Yes, they are a scam. Any time somebody wants to sell you insurance for a very specific targeted event, it is almost always a rip off. Get yourself debt free. Build your EF and you'll be fine. That's the whole point of an EF after all. Also, consider looking into disability insurance. That is not a scam. If you get sick or injured and can't work, disability insurance would cover all of your necessary expenses, not just your mortgage. That's a far better deal.

I'm putting in 8% of my pay which equals roughly 350 dollars a month and my job is matching 5% at 200 dollars a month so at this time I have 550 dollars going towards my 401k. I read recently that you should only match what your job
matches which for me would be 5%. After that your funds should be allocated else where because the stock market at this time is so unstable. HOWEVER I have atleast 30 to 35 years before retiring so that is a huge factor in where my money should be going. Correct?

The advice you'll usually hear around here is to invest in the 401k up to the match. Then fund a Roth IRA to the max ($5,000). If you still have funds to invest after that, go back to the 401k. Your goal should be 15% of income to retirement (not counting the company match - 15% of your own money).

As for the bolded part, I disagree completely. Forget about anything you read or hear that says you shouldn't be investing in stocks because the market is "unstable". Far too many people try to time the market. What they end up doing typically is getting out when prices are low and buying back in once prices recover to lofty levels, making little to no money in the process. Invest in the market regularly and consistently over time. You have a very long time horizon and what happens today or next week or next month will be irrevlevant. 30 years from now, you'll be very glad you did.

**greenskeeper** · 12-11-2011, 11:34 AM

after investing the company match, i would suggest going with physical precious metals. IMO, we are in different times with the market never seen before. Too much world debt and funny money going around.

Payoff house early or Bank Money