Where To Put Vested Stock??

[nikkib303]

I attached my budget so you all can take a look. My question is this: tomorrow some stock I was awarded will be fully vested, and I should get around $3,000 if I sell it. Where would that money best be spent? I would think the credit card debt obviously, but then the other $1,000? Any help would be greatly appreciated!!

Attachments:

BudgetYour Money.xls.jpg (21.5 KB)

[azphx1972]

I would keep the remaining $1000 as a starter emergency fund and then continue with your debt snowball. Also always try to keep at least $500 in your savings, as explained below:

articles.moneycentral.msn.com/SavingandDebt/LearnToBudget/want-to-sleep-better-save-500-dollars.aspx

[resolution]

I agree about the need to keep $1000 handy in an emergency fund. I would probably go after the 401k loan next, since those are usually required to be paid in full if there is a job loss. Also if the credit card balance was created by going over budget, you might want to split up your household category a little more so you know exactly where the money is.

[nikkib303]

As far as my debt snowball goes, I plan to tackle the car payment next and then my 401(k) loan I guess. I wasn't planning to pay off my student loans early, because the interest is tax deductible, but is that smart?

[azphx1972]

I assume the student loans are the ones at under 5%? If so, I wouldn't pay off those early until you've paid off all other consumer debt, maxed out your retirement savings, and fully established your emergency fund.

[phil5185]

I would keep the three <5% loans for the full term, you will get better utilization of your income by investing in your 401k than by prepaying low interest long term debt.

Yes, obviously pay the 22% loan. And if that is your 'using card' be sure to pay in full each month, don't borrow from them.

I would not prepay the 9% car loan, it will be gone in less than a year. And it is more important to you to keep $1000 in savings (so that you never have to borrow at 22%). It costs about $150 to keep the loan, worth it to you when you compare it to needing to pay 22% for an emergency.

What is your degree? The $35k SL is not out of line, it probably plays a role in your ability to earn $48,000/yr?

[nikkib303]

My degree is in marketing. I took out way more loans than I needed, because I had a lot of scholarships. At the time it seemed like a great idea. Even so, it is working out ok because I am finally making decent money. I just got a promotion at the beginning of the year, so I am finally making more than our monthly expenses are. I want to clean up the little messes that I have and get started on something else.

So, pay off credit card, pay off 401(k) loan, car will be paid off next year. Keep making student loan payments obviously. My next question is how much should my emergency fund be, and my next goal is to buy a house. My credit is crap and I need a down payment, so I am assuming I have about three years before my credit is better. Where would be the best place to start a house down-payment fund. Just a savings account at the bank? And is that where I should keep my EF as well? My son starts school in September so lower daycare bill by about half, and then once the car is paid off I can put that towards a down payment as well, so I am hoping I can build something up in the next few years, but I think if it is just sitting in my bank, I will be tempted to dip in here and there.

[azphx1972]

Your EF should be 3-8 months of average expenses, depending on the stability of your job (the less stable, the bigger the EF). Yes, keep your EF safe in an FDIC insured savings account. I would also start a tiny ROTH IRA (put $100 or so in it), so that in 5 years you can more money into it and use it your backup EF. Good luck!

[Plain Old Petunia]

If having your savings at your regular bank tempts you, then put your savings elsewhere. Online banks pay better interest, but it is still pitifully low right now.