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Where to stash the cash?

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  • mkintx mkintx 
    Participant
    Status: Physician
    Posts: 35
    Joined: 01/08/2016

    I am trying to decide where to put about $40k that I just received.  My job may be disappearing in the not so distant future, so I am wondering if it is time to actually pay down low interest debt.

     

    My student loans are at 1.625%, so I have not been aggressively paying them off.  I have $24k left to go.

    My mortgage is at 3.625%, and I owe $373K on a house worth ~$800k.  I am in a homestead state, if that matters.

    I have $978K in retirement money ($484 in taxable, $435 in Keogh/Ira, and $53 in Roth ira).

    The college accounts are adequately funded.  I fund the retirement accounts as fully as possible every year already.

     

    I typically put money into the taxable account since it earns more than the interest on my loans, but I am thinking it may be time to just get rid of the loans.  Alternatively, paying down the mortgage would be asset protection and a higher interest rate to pay down.

     

    I know there is no right answer, but I’m curious as to what the WCI forum hive mind would do.

    #205843 Reply
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 399
    Joined: 06/12/2017

    If your job may be disappearing in the not-so-distant future, why not place the money in savings to give you some cushion in case you are out of work for a period of time between positions? Then, if the transition goes smoothly, look at putting it to work in your taxable account of paying down debt.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors
    http://www.fswealthadvisors.com | (717) 496-0900

    #205845 Reply
    Liked by jhenry, Tangler
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3789
    Joined: 01/08/2016

    Invest.

    #205849 Reply
    Avatar Anne 
    Participant
    Status: Physician
    Posts: 938
    Joined: 11/07/2017

    Do a mental exercise and pretend you’ve put the money in one place or the other and see how these different scenarios make you feel.  Does getting rid of that small student loan feel awesome or do you feel bad for paying off a low interest debt instead of investing?

    Now do the mental exercise and pretend you’re without a job and you’ve put the money in one place or another and see how it makes you feel.

    Sounds hokey but it’s always helped me.

    If you’re potentially going to be jobless, what is the plan?  Working spouse and you don’t have any financial pressure to find a new job immediately?  Lots of options for a new job locally or you might have to move?  All of that would affect my decision, but like Faithful Steward’s advice to boost your emergency fund during the transition unless that’s not a concern.

    Whatever you decide it sounds like you are deciding between financially responsible decisions a,b, or c and at the end of the day it prob won’t make too much difference in your long term financial wellbeing, so I say do what will make you feel the best.

    #205872 Reply
    Avatar Tangler 
    Participant
    Status: Physician
    Posts: 259
    Joined: 08/23/2018

    If i was about to loose my job i would keep the cash as cash! Emergency fund. No question No doubts

    #205898 Reply
    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 3159
    Joined: 01/14/2017

    Agree with a few above. You don’t describe an e-fund but say that you might be losing your job. I would park it in a high interest savings vehicle (VMMXX, for example) if you don’t have a sufficient e-fund. This discussion about student loan or mortgage payment seems like a pilot deciding what to eat (don’t choose the fish!) as they’re about to fly into a mountain.

    #205944 Reply
    mkintx mkintx 
    Participant
    Status: Physician
    Posts: 35
    Joined: 01/08/2016
    Earnest refinancing bonus

    Thanks all! To clarify, I don’t expect to be unemployed,
    I just don’t know what the job will look like in a year. There’s plenty of work, it just might not be as lucrative. I had been thinking that not being tied to debt would make that easier to tolerate. I do have an e-fund of about $100k in cash.

    #205954 Reply
    Liked by jhenry, ENT Doc

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