Requesting Financial Advice with money left after living expense paid per month.

[letmeride]

Hi All -

I'm hoping you can provide me some financial advice on how to manage/invest my extra money at the end of the month.

Here are my details:

Salary: $115,000 (approx bonus $20,000) Gross 135,000
30yr Mortgage 4.5%: 145,000 remaining, payment of $772
HELOC 3.5%: (35,000 loaned to family, may not see again, paying minimum payment for now)
Auto Lease: $495
Credit Cards (1500 - 2500/ month) - paid in full every month
401K: Max contribution by end of year ($18,000)
IRA: Already maxed out in January
CMA Brokerage account: $65,000

After paying bills/living expenses monthly I have about $800 left. I started paying another $300 toward mortgage which puts me on a 15 year schedule and the other $500 toward my brokerage account. I don't feel I want to put more into my home, because I like the idea of liquid cash with my CMA/brokerage account where I can pull my money out at any time, so i'm comfortable with the additional $300. I'm also single and don't have any plans to move (if that answers a question).

I don't know if it makes sense taking that $300 and start paying down the HELOC or put it toward the CMA and make normal mortgage payment. I've even considered pulling cash out of my CMA to pay off the HELOC to eliminate that debt. My CMA is only around a couple percent, but I just made changes so hopefully that will change. If/when I get the money from family to pay off the HELOC, they will pay also be paying the interest. I trust they will, if they can, but there is no timeline and i'm basically considering it a gift and if I get it back, bonus. So, im trying to figure out my best situation assuming I never see that money.

Any advice?

[Nutria]

Any advice?

Some...

1. I'd move the CMA to an online bank paying 0.75% interest instead of 0.02%.
2. Is the CMA your "checking account", or your EF?
3. I would not have maxed out the 401(k) and IRA in January. You got lucky this year with the 11% correction, but DCA (that's what a 401(k) really is) is still the best plan.
4. No mention of taxable investments. That's where I'd put the $800/mo. Build up an initial $3,000 to buy an S&P 500 index fund. Another $3,000 for a short term bond fund, and lastly for a managed stock fund aimed at big, safe, dividend generating companies. (But that's my risk tolerance at my age. You might want something riskier.)
5. What vehicles are your IRA & 401(k) in? Cash or equities and bonds?

[letmeride]

My CMA is an investment account at Merrill Lynch which is taxable. It's earning about 2 percent not .02 percent. I'm invested 86% equity and 14% fixed income.

I have a checking account for paying bills that holds just enough for monthly expenses and this extra $800 per month i'm trying to understand what to do with.

My 401k is not maxed out yet. I'm on target to max it out by end of year...a little bit each check. My IRA is maxed which is all equities.

[Nutria]

My CMA is an investment account at Merrill Lynch which is taxable. It's earning about 2 percent not .02 percent. I'm invested 86% equity and 14% fixed income.

Do you consider it your Emergency Fund?

I have a checking account for paying bills that holds just enough for monthly expenses and this extra $800 per month i'm trying to understand what to do with.

Me too...

My 401k is not maxed out yet. I'm on target to max it out by end of year...a little bit each check. My IRA is maxed which is all equities.

My mistake.

[letmeride]

Yes, CMA is my emergency fund.

[Nutria]

Yes, CMA is my emergency fund.

I'd not invest it in equities. If a crash comes, your stocks will tank just when you might lose your job. Or imagine if you needed that money in March 2009 (the bottom of the post-bubble crash). For the same reason, I wouldn't put it in bonds either.

OTOH, do you really need $65K? I know that's six month of income for you, but what's really needed is six months of expenses. And "tight belt" expenses at that!! Also, if you're married, if your spouse works, what's the likelihood of her being laid off at the same time? (Of course, maybe she's stay at home with the children and you do need $65K...)

[Jluke]

You're in good shape.

I had similar cash situation but that was before I started maxing 401k.

I assume you are using a rewards credit card for your purchases.

Being critical. Why are you leasing a vehicle?

I know you don't want to put more into the house but...

One other thing to consider is a refi of the mortgage to 10 or 15 years. I'm not sure though how far into the 30-year mortgage you are so that might not make sense.

Are you keeping up with home maintenance?

Otherwise save the cash for now.

[feh]

Any advice?

Without doing an in depth analysis of your numbers, it appears as though you are doing well.

First step - review your personal finances (click on the link in my signature). The $500/month vehicle lease jumps out as a poor choice.

Second step - get your investments in order. Here is the place to start: https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit

[MonkeyMama]

I'd consider refinancing the home. Interest rates were really low last week and not sure why you have a 4.5% rate? Could probably drop by 1%? Or refinance into a 15-year loan at an even lower rate? You'd have to run the numbers, but is something to consider.

[scfr]

Why did you choose to lease rather than purchase your vehicle? When does the lease expire?

One option to consider is putting the monthly excess to savings so that you can purchase your next vehicle with cash.

[97guns]

Why did you choose to lease rather than purchase your vehicle? When does the lease expire?

One option to consider is putting the monthly excess to savings so that you can purchase your next vehicle with cash.

a $500 lease is huge, must be a very nice car