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I know I have a 'good' financial problem but interested to hear what some of the pros think....
Here's the debt:
Mortgage $230K
Car: $14K 1.9%
student loan: $12K 3.25%
Credit card debt: little to none.
Kids: 2 under 7
Next big purchase: Considering a boat in the next 6 months, probably $15-20K.
If we paid off car, SL and cash for boat, (essentially leaving us with only a mortgage as long term debt), it would be less than 10% of our overall financial position (cash 20% & securities 80% including 401K).
With the market doing what's it's done, is it time to take some money out at the market 'top' and pay off all those larger debts? I understand the strategy of debt interest vs income interest and going with whichever is higher but there's also the peace of mind factor of not having debt other than the mort (until I buy the hole in the water and start throwing money into it!)
Sometimes... for certain things.
Taking market high gains and shifting them to some other investment... is better.
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Considering a boat in the next 6 months, probably $15-20K.
Nope. Not even on a loan.
Be a pal of some boatowners.
Buy gas and beer the 4-10 times a year you go out then smile and wave as you leave the dock.
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student loan: $12K 3.25%
Credit card debt: little to none.
I'd rather see current income used to settle these promptly (and set up the EF too)...
even in preference to additional equity investment until they're dealt with.
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Mortgage $230K ; Car: $14K 1.9%
You're likely to ALWAYS have these... and your amounts aren't especially high
if you can you maintain the obligation from income. Can you?
Last edited by MrRational; 11-11-2013 at 07:30 AM..
Can't blame anyone for taking some profits now with the market at, or near, record highs even though I believe we could see additional gains over the next two or three months.
Late January or February looks like the best time for a significant market pullback, or correction, in my current view.
By the way, many would consider a boat a bad investment. Not me. As an avid water-skier, my friends and I are getting years and years of enjoyment out of mine.
Can't blame anyone for taking some profits now with the market at, or near, record highs even though I believe we could see additional gains over the next two or three months.
Late January or February looks like the best time for a significant market pullback, or correction, in my current view.
By the way, many would consider a boat a bad investment. Not me. As an avid water-skier, my friends and I are getting years and years of enjoyment out of mine.
Some good advice on boat ownership I was given is to realize it's not an investment at all, that you're going to lose money no matter how you try to figure it out. Once you're comfortable with that fact, then you can really 'enjoy' the boat and not worry about what's it's costing you. Boats are a pure expense, not matter how we spin it. But, for people that love being on the water, it's money well spent.
I don't own or boat but I used to work for a boat owner's association. A boat is a HUGE expense, even after purchasing it in full. My jaws dropped when I found out how much gasoline costs. Don't forget that you'll need insurance for loss, as well as some sort of towing service in case you run out of gas or the boat malfunction in water. I'd steal a boat waaaaay before I'd ever buy one, but that's just my opinion.
The two happiest days in a boatowner's life are the day he buys it and the day he sells it.
I am assuming your mortgage rate is low so I wouldn't pay it off.
The other rates are low too. The thing is (and this is very unscientific), We're almost "due" for some sort of correction.
If you paid off the car and student loans now, you probably would be OK - OR, we could keep going at 15% a year for three more years and you'd loose some pretty nice gains.
I don't own or boat but I used to work for a boat owner's association. A boat is a HUGE expense, even after purchasing it in full. My jaws dropped when I found out how much gasoline costs. Don't forget that you'll need insurance for loss, as well as some sort of towing service in case you run out of gas or the boat malfunction in water. I'd steal a boat waaaaay before I'd ever buy one, but that's just my opinion.
I remember in "The Millionaire Next Door" (I think) they said that the two biggest regrets of the wealthy individuals they surveyed were buying a second house, and buying a boat. The reason being that people never end up using either as much as they think. Big expense resulting in limited enjoyment is the result.
As far as the OP, I see nothing wrong with paying off debt when you have cash on hand.
I didn't see anything about income, nor information about savings/retirement/529s etc..
I think it would be wiser to get rid of the student loans before the boat, unless you just want it that badly. It doesn't seem that you are going to come out far worse or better in most cases.
Lenniel, you also have to figure out what those gains will cost in terms of taxes. Sell on the upswing and you owe capital gains -- sometimes. And also run the numbers of what you lose in future gains of that money.
To my way of thinking, you're using expensive money to pay off cheap money.
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