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After many personal sacrifices, we paid off the final car loan, leaving only the mortgage and utility bills as our monthly bills. My fiance and I want to make the most of our funds.
I was stuck between paying off my mortgage and investing. After our recent refinancing, our mortgage interest rate was only 2.3%. We can get higher returns from stocks or real estate. My fiance wants to deposit into a traditional savings account and spend more money on vacation because we have young children.
I spend my money wholeheartedly for the children, but I also want to use our money wisely. What is the best financial decision for our family?
-Confused planner
Dear confused,
Paying off debts requires a lot of disciplinary action, especially when you are young children. Therefore, I hope I can fall on the balloons and confetti and congratulate you on achieving this goal.
In order to pay off debts, especially when you pay off debts quickly, you usually need to concentrate.I know this because at the end of 2020, I paid it off $12,000 in debt in 12 weeks Celebrate the new year without debt.
When you reach a big goal, sometimes you will go through the “how is it now?” phase. Don’t get me wrong. It is a great problem to have extra money to spend every month.
But when you spend all your energy and extra money on debt, resetting your brain can be a challenge. Sometimes it makes sense to focus on multiple goals at once, and it will take you longer to achieve them. Perhaps the most difficult part is allowing yourself to pursue non-financial goals.
I think some of you feel that taking a vacation is irresponsible. I really hope I can convince you. Making the most of your money is not always related to accumulating wealth. Budgeting for the holiday and leaving lasting memories for your family is undoubtedly a goal worth pursuing, especially after you both worked hard and sacrificed.
The biggest advantage of this situation is that you and your fiancé sound as if they are both on the same page. Both of you want to save money and spend some money on your children. You just need some help to set the priority.
If neither of you sit down and check your budget, that is your starting point. Figure out how much money you need to rely on and how much you want to bring to make money, so you can concentrate on spending the extra money.
Until then, you will not say whether you have been saving or investing.A good rule of thumb is Save at least 20% Your income.If you don’t have much savings or investment, then your first two priorities are to establish at least three months Emergency fund In a regular savings account, and make contributions to your retirement account.
If you or your fiance has a workplace retirement account, make sure you have enough contributions to get a perfect match with your employer.Otherwise, you can open one each Roth IRA And make your own contribution.
After you have an emergency fund and save for retirement, allow yourself to budget for some interesting things, such as vacations. This does not mean that you have to take first class and stay in a luxury hotel. If you are worried about overspending, you can start with your budget and start a long weekend trip.
Unless there is any debt that puts you under severe stress, I actually recommend paying off your mortgage as your lowest priority here. If you are about to retire, my answer will be different because I want you to keep your expenses to a minimum. However, since your child is still young, I assume that retirement is a way for both of you.
A 2.3% interest mortgage is about the lowest level that can be used. Therefore, I will use the lowest rates we have seen in our lives. You’d better invest these funds in index funds and allow them to compound over time.
No matter how you decide to prioritize, I think you need to relieve some of the pressure. You don’t need to figure out how to spend every penny of the extra money released tomorrow-although this feeling may have happened since you just paid off your non-collateralized debt.
There is no one-size-fits-all best financial plan for your family. Aimed at making wise decisions, not perfect decisions. It sounds like you both have a good start.
Robin Hartill is a registered financial planner and senior writer for The Penny Hoarder.Send your tough money questions to [email protected].
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