Remember when I asked you what I should do with my $3,300 payout check from my former job? While I ended up with only $2525.25 due to taxes (still, that number pattern is pretty awesome), I did as most of you advised: I put $1000 into my Roth IRA, then the rest went to our largest student loan with Sallie Mae. (Note: Again, Sallie Mae has screwed us over. A post will have to come with all of the ways that Sallie Mae – oh, excuse me, Navient – screws us over.)
When we closed on our house, we managed to walk away with a little over $8,000. The fact that we made ANY money at all, considering we were only in the house three years and we had to pay both real estate agents and other fees, etc…. well, that’s pretty much a miracle.
What to do with it? I’m interested to know what you would do, but this time I’m not asking for advice, as we have determined how we will deal with this windfall!
We do have some savings goals and Debt Eradication goals. We have a trip to France for a conference in July 2015, we want to save for retirement, and we want to have at least $1000 in an emergency fund.
However, we also have debts. Lots of student loan debt – over $60,000 of it.
But… another savings goal is important, too. We want to save for a down payment – and do it PROPERLY this time. We want to avoid PMI – or at least come close. So that $8,000 will be put into a savings account. After researching, I discovered that our very own bank (a credit union for state employees) has a 1% interest rate money market account! There are no fees unless your balance goes below $250. $8,000 earning us 1% interest is not – in actuality – better mathematically than paying down debt with it, when the student loan stands at 6.88% interest. However, we have decided that we will probably want to buy a house in the next ten years, and having that money in a savings account making us at least some interest seems right for us right now. I considered a CD through our financial institution; we could have gotten a 3-year for 1.25% interest or a 5-year for 1.5% interest, which is quite tempting. However, again – we decided that being able to add more to that account as we go coupled with the freedom of having the money liquid is better for us right now.
We are basically going to treat this cash like it’s not even there – stash it away in this account and let it grow both by interest and by us directing some more over there each month.
I recently read a blog post in my Feedly by someone who just took money out of her IRA to pay down student loan debt (she posted over at an early retirement blog site, and got that surprising advice from those folks!) and it really did make me think. Then I went back to my saved items in my Feedly feed and couldn’t find it! If anyone remembers the post I’m talking about (it was just within the past day or so, I think!), please let me know in the comments! (EDIT: It was Melanie from Dear Debt! Thanks go out to Brooke from pftwins.com!) Anyway, I enjoyed reading what she had to say. One other positive with putting this $8,000 aside in savings is that we can get to it easily and do something different with it if we change our minds. I like having that freedom! Because 6.88% student loans is a lot of interest accruing on us….
In other news…. I’m so excited to see what our budget will look like for REAL as we continue this fall – things are a bit tight for October (we’re living on last month’s income, and it wasn’t so hot by the time I zeroed out our credit card bills). However, I think that come November, we should be able to put away about $500 for the travel fund, about $75 in the emergency fund, and hopefully around $200 extra in student loan payments (that’s on top of the $507 we already pay as our minimums). Then, if we can add some here or there to help our house fund grow, then that’s the icing on the cake!
Although we have made our decision (for now!), what would you do in this situation? Apply the entire amount to student loan debt? Put it in savings? A combination thereof?
Image edited from http://www.freedigitalphotos.net/