Just a mortgage left. What should we do with our extra cash?

Question

My wife and I just got married and through a crazy wedding gift were able to pay off the car, student loans, line of credit, etc and still have $33000 left. Now our only debt is about $130000 on our mortgage.

We clear approx $5500/month and pay out about $1850 including all bills and mortgage payment (NOT including groceries + entertainment).

How much should we save and how much can we spend without feeling guilty? I am 31 and she is 25.

We have been in debt forever and now that we are ahead I don't want to blow it!

Answer 1

Isn't is wonderful to be debt free? Congratulations!! Here is my "to do" list for you:

Make a budget. A budget is a tool which allows you to acomplish your goals and to never have to worry about money ever again. Include a line for "new car". Start saving now for the car(s) you will need in 5 years so that you will never have car payments again.

1. Open Roth IRA's for you both and fully fund them every month. Between the two of you, when you retire, you will have over a million dollars tax free.

2. Enroll in the 401(k) program at your jobs. Contribute the maximum each year. Early retirement is in your future.

3. Save at least 10% of your net income (after the Roth contributions) until you have an emergency fund of 6 months of your income. That way if there is a job loss or layoff, you don't have to worry about going back into debt. Since you have 33K left, you actually already a 6 month emergency fund in place. Put $10K in a "risk free" CD that you can tap into at any time. Put the rest of it in laddered CD's so that some of the money matures each month. Then just keep rolling them over into a new term.  That emergency fund will just sit there generating interest year after year unless you have a real emergency.

4. Start paying extra onto your mortgage. If you pay an extra $2000 onto your mortgage each month, then your mortgage will be paid off in about 5 or 6 years and you will own your home free and clear.

5. Put 5% of your net into a savings account for vacations, furniture, or whatever. Remember to have fun and live your life, don't let your life pass you by.

6. Stay away from credit cards. You already know that credit card debt is like quicksand, only the death is much slower.

Congratulations on your marriage and making the decision to stay debt free. You will never regret it.

Answer 2

Congrats on your marriage and good fortune.  Talk to an estate planner to get some tax advise and investment information.  You should save as much as you can and have it protected by a trust.

Answer 3

I would get some Roth IRA's.  Plan ahead for your future.  At your age , it will pay you back big time.