Hi Money Minder,
Hey there, I’m 26 and just chilling in my condo, living that single life with no kids. So, I bought my place in a fancy area last year and got a mortgage of 325k at 6.95%. I’ve been throwing an extra 1,250 bucks at the principal every month like a boss. Now, I’m living my best life and I’m already at year 5 on my amortization schedule after just 1 year!
But here’s the tea – I plan to keep doing this until my principal payment matches my interest payment, which is like, in year 20. I like me some tax benefits, so I’m gonna ride that wave until the interest costs chill out.
So, I’m really good with budgeting and stuff. Recently got a raise at work and now I’ve got some extra cash just hanging out at the end of each month. Like, where do I even put this moolah?
My take-home pay is around 8200 a month, and my mortgage and home costs are about 3k a month. Other expenses clock in at around 2k a month. After the princely sum of 1250 extra bucks towards my mortgage, I’m left with 2k extra each month. I’ve got a 6-month emergency fund in a High-Yield Savings Account, max out my 401k/Roth every year, and own my cars outright. No student loans or any other debts, except my mortgage!
What do you reckon I should do with this extra cash, Money Minder?
Signed, Financially Confused
Response from THE MONEY MINDER:
Hello There,
Congratulations on your prudent financial habits and the progress you’ve made in paying down your mortgage! It’s clear that you have a solid plan in place, and your dedication to achieving financial milestones is commendable.
Given your current financial situation, it might be a wise decision to consider investing the extra $2k you have each month. While paying down your 7% mortgage is a good option, you already have an aggressive payment plan in place, and having a diverse investment portfolio can offer long-term growth potential. It’s essential to strike a balance between reducing debt and investing for the future.
One option you could explore is contributing more to your retirement accounts beyond the 401k/Roth max. Consider opening a taxable brokerage account or investing in low-cost index funds to continue building your wealth. Additionally, you could look into other investment opportunities such as real estate, bonds, or even starting a side business to increase your income streams.
Ultimately, the decision on what to do with the extra money boils down to your personal financial goals and risk tolerance. If you feel comfortable with your current mortgage payoff schedule and are interested in building wealth for the long term, investing could be a sensible choice. However, if you prioritize being debt-free and want to pay down your mortgage sooner, continuing to put the extra funds towards that goal is also a sound strategy.
Remember to regularly review your financial plan, reassess your goals, and adjust your strategy as needed. You’re already on the right track with your disciplined approach to budgeting and saving. Keep up the good work, and you’ll continue to make progress towards financial stability and growth.
Farewell from THE MONEY MINDER.
