What to do with extra money

[bjl584]

I'm in a position where I have an extra $1000 a month that I need to figure out what to do with.

My only debt is my mortgage. Around 15.5 years remaining on a 20 year note.
I have no immediate plans of selling or moving.

EF is fully funded with 6 months worth of expenses.
No major purchases on the near term horizon.

I'm currently saving/investing around 22% of my gross income annually.

I could invest and save more, or I could aggressively pay off the mortgage.
An extra $1000 a month equates to a double payment every month.

The math probably says to invest the money, but the idea of being completely debt free in the next several years is appealing.
It would be freeing to say the least and afford me the ability to take my foot of the gas career wise if I so chose to do so.

I could always to a combination of both, say $500 to each.

I've been wrestling with what to do for a while now.
Does anyone have any insight on how they woudl approach?

This is a good problem to have I suppose.

[disneysteve]

What’s the rate on the mortgage?

Without knowing that info, I’d lean toward doing some of each - accelerating mortgage payments and investing more.

[terri77]

How does your future car fund look?

[Jluke]

Is your EF of 6 months more or less than 6 months of income?

I would consider having more cash first.

what’s the balance on the mortgage? Wanting to see if it is easy enough to payoff with that extra per month. ~100k or less -easy.

[bjl584]

What’s the rate on the mortgage?

Without knowing that info, I’d lean toward doing some of each - accelerating mortgage payments and investing more.

4.2%

[bjl584]

Is your EF of 6 months more or less than 6 months of income?

I would consider having more cash first.

what’s the balance on the mortgage? Wanting to see if it is easy enough to payoff with that extra per month. ~100k or less -easy.

6 months expenses, not 6 months income
To go to 6 months income I'd have to nearly double it

[bjl584]

How does your future car fund look?

no plans to replace any cars. I have money for it just in case of catastrophe.

[bjl584]

Is your EF of 6 months more or less than 6 months of income?

I would consider having more cash first.

what’s the balance on the mortgage? Wanting to see if it is easy enough to payoff with that extra per month. ~100k or less -easy.

Balance is $163K

[disneysteve]

A 4.2% rate makes the decision kind of borderline. I don't think there's really a wrong answer here though.

You can dump cash into a 1-year CD right now for 5.15% and there's no signs that rates will be coming down in the near future. You could buy a $1,000 CD every month, keep the mortgage, and come out ahead guaranteed. Zero risk.

Or you could go with the peace of mind route and dump $1,000 into the mortgage every month. You'll save 4.2% on the money which isn't a bad return for cash either.

Me? I'd split it. And I've done just that in the past when we still had a mortgage.

[james.hendrickson]

I'm in a position where I have an extra $1000 a month that I need to figure out what to do with.

My only debt is my mortgage. Around 15.5 years remaining on a 20 year note.
I have no immediate plans of selling or moving.

EF is fully funded with 6 months worth of expenses.
No major purchases on the near term horizon.

I'm currently saving/investing around 22% of my gross income annually.

BJ, give yourself a pat on the back man. You're doing really well.

[riverwed070707]

Agree with DS but I'll dig a little deeper. How old are you and how far are you from retirement? I'm usually staunchly against paying off the mortgage, but if early (or near term) retirement is a goal AND you plan to stay in your current house during retirement AND all your other retirement savings are on track, I'd vote for throwing it all at the mortgage. Your rate is high enough to see some significant savings and the lower expenses once its paid off will give you more flexibility when you're ready to cut back or stop working.

[myrdale]

I'd max the Roth IRA, and everything after that each year, i would throw at the mortgage.

[bjl584]

Agree with DS but I'll dig a little deeper. How old are you and how far are you from retirement? I'm usually staunchly against paying off the mortgage, but if early (or near term) retirement is a goal AND you plan to stay in your current house during retirement AND all your other retirement savings are on track, I'd vote for throwing it all at the mortgage. Your rate is high enough to see some significant savings and the lower expenses once its paid off will give you more flexibility when you're ready to cut back or stop working.

I'm 44

No firm date on retirement, other than I'd like to go ASAP. A paid off house would make the difference

[bjl584]

I'd max the Roth IRA, and everything after that each year, i would throw at the mortgage.

I'm already maxing a ROTH, so that is covered.

[disneysteve]

No firm date on retirement, other than I'd like to go ASAP. A paid off house would make the difference

Why? What difference does it make if you have say 100K extra in savings and a 100K mortgage vs nothing extra in savings and no mortgage? Financially it’s a wash either way.

Having no mortgage is more psychological than financial in that situation.