I recently sold my car and have $12,000 sitting in my bank account. I will also receive a small tax refund from the IRS, so I’ve been running the numbers in my favorite excel spreadsheets, trying to determine what on earth to do with this money.
As I mentioned in a previous post, I’ve been quite sick for about a year now, so I’m considering putting the money into a savings account in case I’m unable to return to work on a full-time basis.
If I didn’t have a sizeable emergency fund, I would use the money to build one. But I do, so I think that’s out of the question.
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 by $11,708. I can buy a CD for just a little under the 4.875% rate.
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 NC, so if I put $10,000 towards that mortgage’s principal, it will save me $36,125 in interest over the life of the loan. That also saves me 1 1/2 years of mortgage payments.
So what do you think I should do? Should I use the money to pay down my very, very large mortgage?
I am only 28, so I fear that I am losing out on the beauty of compounding interest by paying down the house. At the same time, though, I’m looking at a current interest payment each month of $2,400+ a month.
*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… 😉
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
Maybe ‘lend’ your money at higher interest rates than what CDs offer you….