What do I do with $15,000? Help.

March 31, 2006 at 5:35 PM 3 comments

I have recently sold my car and have $12,000 sitting in my bank account. In addition I will be receiving a small tax refund from the IRS. So I have been running the numbers in my favorite excel spreadsheets trying to determine what on earth to do with this money.

As I mentioned in some previous postings I have been quite sick for about a year now, so in the back of my mind I am wondering if I should keep the money safe in the bank in case I am unable to return to work on a full time basis. But I do have a sizeable emergency fund already.

So here’s my dilemma: I currently have two fairly sizeable mortgages. The first, has $208,076.67 remaining but it’s a 15 year mortgage at only 4.875%. So it would be pretty crazy to add that lump sum toward the mortgage. It would only reduce the total interest paid by $11,708. And I can buy a CD for just a little under the 4.875% rate. Plus I’d be foregoing the mortgage deduction at tax time.

My second mortgage is currently $490,051.04 at 6.0% for 30 years. Yes, I realize that’s an insanely large mortgage, but it’s on a beach property in Duck, NC. So if I put $10,000 towards the principal of that mortgage it will save me $36,125 in interest over the life of the loan. And save me about a 1 1/2 years of mortgage payments.

So I really need the help of all of you pfbloggers out there. Do you think I should invest the money in a CD, in the stock market, etc. Or should I use the money to pay down my very, very large mortgage?

I am only 28. So I fear by paying down the house, I am losing out on the beauty of compounding interest. At the same time though, I’m looking at a current interest payment each month of $2,400+ a month.

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If men ruled the world all parties would revolve around a tv. A little help from the savvy moms out there

3 Comments Add your own

  • 1. bored  |  March 31, 2006 at 7:44 PM

    *take this advice with a grain of salt- im not a financial planner or anything fancy like that…plus my wife thinks i’m a moron – end disclaimer*

    seriously, if you’re ill and think you’ll need the cash in a relatively short period of time, DO NOT pay extra on either mortgage

    It’s like stuffing that cash in the walls…you’ll never be able to access it. especially if you start working only part time…try getting a HELOC with a part time / no job…won’t happen.

    I’m a safety nut, so i recommend the safe side.

    you’ve got 4 options:

    - under the matress (not recommended)
    - high yield online savings account (good)
    - CD (better)
    - treasury bills (best)

    personally, Im a Tbill fan, I would recommend a 3 or 6 month bill (or 1 month, depending on your situation)…remember, the rate is state-tax free, so the actual yeild is a little higher than you think

    http://www.treasurydirect.gov

    its really easy

    anyway, just my 2 cents…remember, my wife thinks I’m a moron though… ;)

    Reply
  • 2. bored  |  March 31, 2006 at 7:52 PM

    ok, just read your other post about your hefty emergency fund…sounds like you’ve done your homework! ;)

    if you think you’re covered there, option 5 would be a stock mutual fund / index fund…still very liquid if you need the cash, but has the possibility to rise more than a CD or T bill (but also has the possibility to fall).

    but again, if you still think you will need access to that cash anytime soon, a stock fund is not a good short term place to park your money…they’re for long term investing.

    so, its your call….but if in doubt, i would go with the T bills on treasury direct

    Reply
  • 3. WIM  |  March 31, 2006 at 8:14 PM

    Maybe ‘lend’ your money at higher interest rates than what CDs offer you…. You may want to check my posts on related matters.

    http://wanderingindianmonk.blogspot.com/2006/03/what-options-do-you-have-with-your.html

    Reply

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