What to do with this cash?

[lukem]

I have 25K in cash. Right now it is earning about .01% (nothing) in a online cash management account. It is basically my disaster fund...long term job loss...major health issues, etc. I have some other cash in my emergency fund for any other financial bumps in the road.

I'm pretty torn on whether I should keep this cash, invest it in something "low" risk (but not cash), or pay off the rest of my mortgage (currently owe about 15K @ 4.6%).

I have no other debt, so no opportunity there. I'm 31, have 3 years salary saved for retirement, and currently put 25% towards retirement. Both ROTHs are maxed out yearly, so I can't park it there.

Any advice or other ideas?

[JoeP]

I'd use it toward my next car. Figure out how much your next car will cost, less residual value on your current car, and then put that much aside. Then I'd consider paying extra principal on my mortgage.

[lukem]

I'd use it toward my next car. Figure out how much your next car will cost, less residual value on your current car, and then put that much aside. Then I'd consider paying extra principal on my mortgage.

I shouldn't need a new car for at least 5-7 years, if not longer. Both have less than 50K miles on them right now.

[feh]

I shouldn't need a new car for at least 5-7 years, if not longer. Both have less than 50K miles on them right now.

Might be time to start a taxable investment account, if you truly don't need to save for any large expenses in the next couple years, your EF is fully funded and all your tax-advantaged options have been used to the max.

[Esozh]

Pay off the mortgage first, then the other $10K... I'd be giving Vanguard a call. I'm in love with Vanguard, sorry...

[Petunia 100]

I would pay off the mortgage. You aren't going to get 4.6% risk free anyplace for YEARS to come.

Then, I would open an online savings account. Do not leave any money (beyond a reasonable buffer) in a savings account earning .01% when it could be earning .85%. I would keep as much in it was I felt was necessary, keeping in mind there is no longer a mortgage to pay.

Next, I would open a taxable investment account. I love Vanguard, too. But any brokerage account which will allow you to buy ETFs with no commission will also do just fine. Buy total market US and international funds or ETFs.

You're doing great.

[Goldy]

I'm going to echo some of the other people here. If it were me I would figure out what my 3mo EF is and would throw the rest at the mortgage. Maybe keep 15k and put 10k at the house? That way should something unexpected come up like a new roof you still have enough to deal with it. Once that mortgage is erased I would build up the EF to 6 months and then look into other investing.

[lukem]

That's pretty much what I was wanting to hear - it is a good idea to pay off the mortgage. I hate debt.

The plot thickens...

I will get an influx of cash in July, totaling 8K, through the sale of some employer stock. This will give me about 38K in cash. I will pay off the mortgage (-14K), put 15K in the EF (representing at 10-12 months of expenses without the mortgage), and still have about 9K for some home improvements.

Yes, you read that right, 15K is 10-12 months expense. We live a pretty simple lifestyle given our income.

Thanks for the input everyone.

[snafu]

What is your risk tolerance? To you, what is a low risk investment? Does your Retirement Account hold laddered CDs, Bonds, Mutual Funds or ETFs or? How stable is your employment? Do you see imminent lay-off due to sequester or business segment? Would you be willing to look at DCA [Dollar Cost Averaging] with a low cost, no fee Mutual Fund?

[Jerry91]

You are managing your money in a great way! As it is your emergency fund, I wouldn’t advice you to use the money to pay off your mortgage. Rather you should invest the money in low risk scheme. You can even speak to a financial planner and he will help you know the better available options.

[~bs]

you could probably just payoff the mortgage, and the 10k should be enough for your emergency fund. Then continue saving for there. I'd hazard a guess that with a paid off mortgage, that 10k should at least be a couple months worth of expenditures, if not a lot more.

[jonidb]

Great Job

I would pay most of the mortgage off but keep a little for house maintenance. I thought I was doing pretty good until I found out I need a new septic. 30 grand later.

[cascade11]

If you won't need some of the money for a while, then I would put a few thousand into no-risk I-Bonds. That way, your money at least keeps pace with inflation and won't lose purchasing power.

[lukem]

Update:

Mortgage is now paid in full, emergency fund is at 9 months. That's a good feeling. I recommend it to anyone.

[JoeP]

Update:

Mortgage is now paid in full, emergency fund is at 9 months. That's a good feeling. I recommend it to anyone.

Awesome news! Now you have extra money every month to boot!