best use of money question

[wyld thang]

Hi, I may get some inheritance money, and I'm trying to figure out the best way to use it(beyond getting me a new/gently used WR250 :baby04: ). Would refinancing the house/putting a chunk down on it to get it down to a 10-15 year loan be a good thing(we are 5 years into our present 30-yr loan), or just keep the money and pay extra principle each month to pay off early be better. I would love to have the house/land paid off as soon as possible...

I don't want to blow the money, I want to use it to help our retirement(we have none) by reducing monthly expenses. We would pay off some debt(high interest), as well as save some for college for two kids(they will have to work through college).

Mostly I'm just wondering about the house. And we are self employed.

[Boleyz]

http://www.amazon.com/Total-Money-Ma...4352417&sr=1-1

Before you do anything with the money, buy, read and apply this book...you will have a secure retirement and be out of debt!!

[mowrey1999]

I know it is just an opinion, but since a home is usually something you pay for over appx 30 years and is one of your biggest investments, I myself would take all you get of any inheritance 100% and put it into what is owed on the house and continue to make my regular payments until paid,I would forget about any toys like 4 wheelers or motorcycles , cars and pay off the home, then you will be free and clear on your home and it will free you up for other things you might want ,You can than put what payments you were making on the house into the bank in CD,s ect to build your nestegg , or use the money for a vehicle and not borrow from the bank possibly since your home is paid for and your not burdened with that payment,This windfall might only occur 1 time in your life and I would use it to my advantage and free your self from debt as much as possible. just my opinion,

[ET1 SS]

Payoff the house.

Do not refinance. Do not change to a shorter term mortgage. Just pay it off.

For most folks their rent / mortgage is the largest portion of their budget. Once you remove that one part, then everything else will be far easier.

[rambler]

I look at things a tad differently.

You mentioned higher interest debit - credit cards most likely.

The house is on a long term deal, stable, there. Assuming you have a good regular interest rate (none of the balloon or variable stuff that is killing people now....) I would _not_ try to refinance at all! Keept he good deal you have. Pay down extra on it is a good idea - if allowed. But don't refinance - that will hurt you in today's climate.

Get rid of the short term, high interest stuff. Get rid of it. Cut up the cards, and pay cash on things.

That high-interst stuff is what kills people. Costs way, way too much.

Get rid of the short-term debits you have, and life will be easier.

After that, apply it to the house principle.

--->Paul

[Jackpine Savage]

I would:
- pay off the high interest debt
- cut up the credit cards
- put the equivalent of 6 months of earnings into a money market fund to be used ONLY in the case of emergency, unemployment, disability, etc.
- pay down the mortgage

[Lizza]

This is my vote too. I'm getting a small inheritance as well and this is our plan.

Originally Posted by Jackpine Savage

I would:
- pay off the high interest debt
- cut up the credit cards
- put the equivalent of 6 months of earnings into a money market fund to be used ONLY in the case of emergency, unemployment, disability, etc.
- pay down the mortgage

[suburbanite]

Ditto Jackpine and Morningstar.

[redwall]

ok just a few points to make.
What you want to do ?
i don't know how much you are getting but your credit score can be hurt by paying off the house to fast.
I would pay off the credit cards first. then go find a financail planner. check with your employer mine came free with my retirment planer and bring along your loan info. my mom had a 50,000 early payment fee if paid off two soon.
take your time and if in question put it into a 6 month thingy and pray.
all spelling erors are either because of lack of sleep or lack of sleep

[FrankTheTank]

Just remember that 100 dollar bills burn up pretty fast in a wood burner, don't taste that well, and when planted, don't seem to produce anything edible

Be wise in your investments.

[wyld thang]

Hi! Thanks for the input! Yes, we do have a normal, good rate loan. And we have cut up the credit cards and are on a plan to pay it off in about 3 years(it was debt from starting our business).

Mostly I was wondering about the house, it would be great to pay it off in one fell swoop, but then there's early payoff fees(sheesh, as is they weren't bleeding us enough already)we'll check into that. Thanks again for your advice!!

Wah, you wouldn't let me spend 1500$ for a new to me dirt bike?! (I have the rest of the money, just have to sell two bikes) Aw, grandma would have approved.

[bill not in oh]

No one here can really give you valid advice on how to invest that money or any other income you have without knowing your financial and personal goals, your income from your business, your ages, medical situations, IRAs, pensions from previous employment, 401Ks, your investment risk tolerance and about 5-6 more things that could influence your decision. All the suggestions so far have been sound conservative general advice, however might not be fiscally sound for you. You need to see a financial planner (as redwall suggested). They'll help you define your fiscal goals and develop an investment strategy that will help you put the money to work in order to accomplish those goals. Selecting the person to help you with this is the tricky part - ask for references and look for someone that's been in the business for at least 25 years - they will have valid references and will have experience with different financial market cycles. My 2¢ ....

PS: They'll probably tell you to go ahead and get the bike....

[Marilyn]

Don't forget about the tax advantage of mortgage interest. At some point there must be a break-even there.

[Selena]

An emergency fund is a must in this day and age. High interest credit card balances should get priority for payoff. I look at the mortgage payment in this manner: it is a fixed monthly amount and the required (key is required) monthly payment on a 30 year loan is lower than a 15 year loan (given equal loan amounts). You don't say what the amount is but I'd beef up emergency and quit lining the pockets of cc companies. Then I'd go to www.bloomberg.com or someother site with an online mortgage calculator. See how much you have left after the emergency fund (3 - 6 months) is 'funded' and CC are paid off. Then determine how much a 15 year mortgage would be, comparing it to the monthly payment to your 30 year payment. Then use your 30 year payment and see what an extra $100, $200 etc. a month will do to knock off the length (and interest paid) of the 30 year. I am not sure in this day and age if you want to increase a fixed monthly obligation when you can decrease your balance on your own (do not sign up for a bi-monthly plan, you can do it yourself without profiting the bank or other institution). Don't forget to factor in closing costs etc. and I believe bloomberg or bankrate has a "is it worth it to refi" calculator.

[fantasymaker]

Originally Posted by wyld thang

I don't want to blow the money, I want to use it to help our retirement(we have none) .

Ok first Go here,
http://www.daveramsey.com/shop/Audio...C48.cfm?afid=7
Then get his books at the Libary while you are there pick up a Copy of "Who moved my Cheese"
Listen to his radio show...stream it if you have too.
Sit and think a while Put in in bank savings accounts in ammounts of less than $100,000 each bank.
get used to having it.
get to the stage where it isnt burning a whole in your pocket.


THEN
Do what you really want invest it in a business that will make your retirement ,put the kids thru school, pay off your debts etc.

[agmantoo]

Put the money where it will work for you when you are not working. This in turn will create a dual income. With a dual income you will have the financial capability to accomplish things that are meaningful to you and your family, presently and in the future.

[brownegg]

I suggest to apply the money to pay off your house. The #1 ingredient to becoming financially free is to own your own home. You will thank yourself over and over for getting rid of big brother!

[HillsideHouse]

I would pay off the house too. If you seemingly miss the mtg. interest tax deduction you get then give the money to charity, feel good & also get to write it off. Works out just about the same.



Hillside

[brownthumb]

Pay down the mortgage and forget you ever got the money.

[Mike in Ohio]

wyld thang,

A number of people have suggested that you pay off your house mortgage. I'm going to suggest that you need to consider several factors before deciding whether that makes sense.

The real question you are asking is whether paying off the mortgage is a better investment than using the money in some other way. I'll just throw out some example numbers to illustrate.

For arguments sake let's say you did well and have a 30 year mortgage at 5%. With the mortgage interest deduction that 5% rate is really only 4 to 4.5 percent depending on your tax bracket.

Can you take the money you would otherwise use to pay down the mortgage and get a better return? If you have credit cards at 15% then it clearly makes more sense to pay off the credit cards than to pay down the mortgage. (note, don't go run up the card debts again!)

Let's say you paid down your credit cards and still had a chunk of cash. You can go out and get 5%+ from money market accounts (look around). That works out to roughly a wash but having the money available for emergencies may not be a bad thing.

There are many bonds (or bond funds) you can invest in and get an 8% return without taking on much more risk.

If you can structure your investments so that you are getting long term capital gains then you are only paying 10%-15% tax on that gain.

Given current interest rates and the investment climate I would suggest thinking twice before paying down your mortgage as others have recommended. What you are saying if you do is that the best return you can get on your money is 5%.

As usual, just my 2 cents.

Mike

P.S. Go ahead and spend the $1,500 on the bike. Everyone needs to live a little.