Where to spend surplus cash?
I have about $ 60,000 in my cash accounts (banking and savings). Some of this money is in a savings account that I would consider my emergency funds. I have a very generous retirement program of about 12% of my salary, which has been established for about the last 6 years. I am 33 years old, with a wife that has a job and a generous retirement plan and 1 baby.
I have some other small mutual funds that I started from savings which are 3-10 years old and have a current value of approximately 12,000 dollars.
I have a mortgage. We purchased it for $ 579,000, and we put down 10%. The first loan was a 7 year arm at a rate of 6.5%, and the second loan was a home equity line of credit for $ 57,900. The second loan is a variable rate, pegged to the prime rate. When I first started that loan, it was at 8.5 %, but it is now as low as 4.2 percent. This, of course, changes with the prime rate. The first loan I pay on principle, and the current debt service is $ 448,000. The second loan is interest only, and still has a principle balance of $ 57,900. The down turn in the housing market has left me with only about 2-4% equity in my home as the latest appraisal was only $ 520,000
My only other debt is a car loan which has a balance of 15,000 and a rate of 5.25%.
What should I do with this extra cash?
1. Pay down that line of credit? (obviously this has a variable rate that can change, and is currently taking up 100% of my line of credit which impacts my credit score)
2. Buy a second property? There are some good deals out there for a second home (i.e. condo in Florida) or a rental property. This would be an investment property since we can get something very cheap, but the downside is managing the property.
3. Put it in an invest vehicle? A mutual fund, bonds, etc.
4. Leave it in my savings account?
5. Or something else?
How much of that cash should I keep in my account versus investing or paying of my debt?