Recently turned 36 years, have the following finances:
- $165K annual income. Single for tax purposes, though I live with my partner and pay them rent (around $2K total including utilities)
- Total other monthly costs equal around $3-4K per month, which leaves around $2k each month. Though a lot of these costs are variable and I can pull back on (i.e., therapy, etc.)
- $12K in savings account - looking to keep this at $15K going forward as my rainy day fund
- ~$55K in retirement accounts (401K) - started investing late (roughly 3 years ago) . Currently putting 10% into 401K, but will increase to 12% starting in April due to my annual comp increase. The 12% increase will offset the raise, so will be left with the same net income.
- Currently maxing out HSA account (Started in 2024)
- Not currently contributing to an IRA account.
- $30K in stocks (from previous RSU grant) - looking to sell this over next few weeks
- ~$20K in pension account (from previous role) earning 6% annually. Cannot touch this until 62, at which point the administrator estimates it will be worth around $60K.
Debt (s)
- $220K mortgage on investment property at 7.1% interest over 30 years. The actual mortgage value is $440K, but both my brother and I split this. Total monthly property related costs are completely offset against rent income. Currently, excess cash flow is going into bank accounts. TBD how to handle going forward, but will likely use any net proceeds to more aggressively pay off this loan, including throwing in an additional $500 per month (from my salary) to help here. Also considering taking $30K in stocks proceeds and dumping all here, or…
- $35K car loan over next 50ish months. Interest is around 5.75%, and total interest over the remaining life of loan is around $5K. Monthly payments are $725/mo here. I’m strongly considering using my RSU proceeds here, even though I realize mathematically it may not be the most efficient way. Reason for this is partly emotional, as I would love to not have a car payment, plus saving $5K interest is not bad. Additionally, I figured it would give me more financial flexibility to either pay off my mortgage sooner, or to invest more in my 401K and IRA accounts.
- About $3K in credit card debt with 0 interest (financed at 0 APR over 12 months). Will pay off before incurring any interest, but no rush to pay it off for now
I guess my biggest questions are, what do I do with the proceeds from the RSU sale? Paying off the car sounds sexier to me, as it would rid me of monthly payments plus $5K interest (over life of loan). However, I realize the mortgage interest is much higher. The thing is, I don’t pay a cent on the mortgage using my salary, as I’m able to cover all costs with the rent income there. So psychologically, that money doesn’t hurt as much (if that makes sense lol). One other thing to consider is the mortgage interest deductions on my taxes, but I haven’t done any calculations there to see what that looks like. Additionally, I’m also considering another investment property that would give me similar cash flows (though I did get lucky w/ first one), so that is also an option.
I should also note I realize I am late when it comes to retirement accounts, and should have at least 4 times what I have now. As such, that’s why I am looking to diversify my portfolio between the stock market and some RE. Goal is to finance at least one more investment property (with net positive cash flows) by the time I’m 40, but also to have at least $225K in retirement accounts. Overall goal is to retire at 60, though unclear what total net worth goal is. Still working through that, but will hopefully include a mix of 4 fully or mostly paid investment properties, plus at least $1.25M in retirement accounts to complement that.
Any thoughts or critiques on my plan? Thank you all!
original posted by brunachoo to r/personalfinance on Fri, 08 Mar 2024 15:04:57 GMT.