I came into $15K the other day and I’m wondering how to use it the most effectively.
Assets:
At any given time I do my best to keep the cash in my checking account hovering between $6K and $12K at all times.
I have $34K invested in Acorns and I aggressively contribute an average of $2,300/mo (about 28% of my take-home). Total gains to date are $5K.
I have roughly $91K in my 401K and I contribute the annual maximum.
I have $1500 in Robinhood.
I’ve also recently listed my car. I’m hoping for at least $6K in the next 45 days.
Debt:
I have $47K in student loans at 4.422%, paying $526/mo.
I have $8,600 in credit card debt at 0% interest until May 2021. I pay $400/mo on this.
I also have $2,300 in high interest credit card debt that I’ve recently accumulated.
I know it’s recommended to have a de facto emergency fund covering at least 3 months. While I don’t have a defined one, my reserve would need to be $10K to cover 3 months. If I needed to withdraw from my Acorns I wouldn’t mind but it’s not ideal (and possibly frowned upon). I feel rather safe given my current circumstances (job security, high-demand skillset, etc.), but certainly open to a change in view.
A few options I’ve considered:
(1) Put the entire $15K toward my Acorns bringing it to $49K. Downside is still sitting with debt.
(2) Pay off both high interest and zero interest credit debt leaving about $4,100 of cash remaining and freeing up $400+ each month which I could then contribute extra toward principal student loan debt or investments.
(3) Pay off only the high interest credit debt, use a low fee balance transfer offer (receiving tons of them lately) in May to persist the 0% interest until paid off. This leaves about $12,700 remaining to put toward either principal student loan debt or investments.
(4) Put it all towards my student loan debt, cutting my debt there down to $32K and then refinancing for a hopefully lower rate (I most recently refinanced in June).
(5) Take the $15K plus the entire Acorns amount of $34K to completely pay off my student loans leaving roughly $2K remaining, with the understanding I’ll be taxed at capital gains on the $5K gains. This would free up $526/mo, but would still have credit debt.
I’m open to a combination of the above or more novel strategies. I’m feeling intuitively that (2) is the most optimal approach, and the extra $4,100 could be start a 1.5 month emergency fund.
Thank you for your advice (and please go easy on me with regard to my emergency fund).
Submitted November 21, 2020 at 06:45PM by boldbrandywine https://ift.tt/36ZUBRV
