Advice on prioritizing after debt is gone

Hello everyone!

My husband and I have paid off thousands of dollars in credit card debt and a car loan in the last few years and we are now debt free, except for the mortgage. I'm looking for advice on how to best proceed from here.

1) We're in our late forties and are only just now starting a retirement fund. (I know that's bad bad bad, and I'm feeling anxious about it.) I read Jesse's book on investing and I know that the goal is to be contributing 15% - but right now we can't afford that much. However, the company matches up to 4% so we currently contributing that and I think we could go up a little.

2) There's also the mortgage to think about. We have about 12 years left on a 30 year mortgage and we'd love to pay it off early, but of course we want to put money towards retirement too and there's only so much to go around.

3) We're about 25% of the way to being a month ahead. 

4) Lastly, we're doing an okay job saving for true expenses but we could stand to do better in some categories. For example, both the auto repair/replace category and the medical category have been pretty depleted this last year and need building back up.

Over the last few years we've been super focused on paying off debt - now that we're finished with that, we aren't sure what the next step should be. Any thoughts? 

16replies Oldest first
  • Oldest first
  • Newest first
  • Active threads
  • Popular
    • nolesrule
    • Stealing From the Future fix is an improvement but is incomplete....
    • nolesrule
    • 2 wk ago
    • 4
    • Reported - view

    First off, congratulations on getting out of debt. That's an awesome achievement.

    Regarding the mortgage, if you are 18 years into a 30 year mortgage, your interest rate is probably around 6%. You might want to look into a 15-year refinance at a lower rate, probably at 3% or less.  It's likely you're payment will be lower as well as your interest remaining to be paid on the loan. Rates have been at an all-time low the last year or so. Don't miss out on the opportunity.

    With the lower interest rate, it would expected that your investments would do a lot better over the long run than the return on paying down the mortgage, so if you are behind on retirement you are better off increasing retirement contributions than paying off the mortgage.

    How long would it take to get to the point where you can use all income received in a month to fund next month's budget if you threw all the money you'd been using to pay off debt at this goal?

    How much more do you need to feel like you've caught up on your True Expenses?

    My recommendation would be to slowly increase those retirement contributions (the longer you have money invested the better) while getting caught up on the True Expenses and getting to budgeting with last month's income. Then when you've achieved those, you should be able to just put the True Expenses into monthly funding that will maintain the categories in the long run and you can pull back on the budget and ratchet up the retirement contributions as much as possible.

    Like 4
  • In a similar situation, though with a student loan rather than a mortgage.  Paying off the last of the credit cards definitely feels amazing.  Congratulations!  I myself am paying off the last of my student loans next month, then working on getting a six month savings cushion (mainly funding true expenses) and then finally starting to tackle retirement savings next year.  FWIW, I will be 47 and plan on putting 25% a year away.  There are online tools that you can use to help plan (or get a financial planner).   Personal Capital and Maxi Fi Planner have both worked for me (as YNAB is great for budgeting and saving but not investing and planning).  Good luck!

    Like 1
      • JennLynne
      • JennLynne
      • 2 wk ago
      • 1
      • Reported - view

      Saish Dawg Congrats on the student loans!! 

      Like 1
  • JennLynne said:
    However, the company matches up to 4% so we currently contributing that and I think we could go up a little.

     I highly recommend a Roth IRA with Vanguard using the Target Retirement funds if you don't know much about investing and just want to get started ASAP.  I read a whole book to understand the stock market and investing back in 2008, but then I ended up just picking TR2045 and I'm so glad I did that instead of waiting and waffling about what to buy.  Better to stick with simple and actually get started than complex and keep delaying. 

    One of the best tips I've heard from Jesse is to try increasing your retirement contribution by 1% every so often.  I don't remember his recommended timescale, but you can pick what is right for you.  Add another 1%, wait a year, 6 months, a quarter, or just wait till you're used to budgeting and sticking to your budget at that income.  Then ratchet up some more.  A word of advice if you're a go getter like me, slower is better than faster for it to work in the long term. I went up 1% then waited a month and added another 1%.  That was way too fast.  I should have waited ~6 months or so.

     

    JennLynne said:
    2) There's also the mortgage to think about. We have about 12 years left on a 30 year mortgage and we'd love to pay it off early, but of course we want to put money towards retirement too and there's only so much to go around.

    If your interest rate on a 30 year fixed isn't 3% or less, then go get a refinance ASAP.  Try your local credit unions to get the best closing cost deals.

    Although I have a string desire to live in a paid for home, I'm not paying any extra on my 30 year fixed at 3% while inflation is so high, and at this point, I'm sorry, I don't want to be political on here and cause divisiveness, but let's just say, I personally think inflation isn't going down anytime soon if some of these bills get passed and I'm not going to be paying an extra dime on my mortgage any time soon.

    A low rate fixed rate mortgage is a great inflation hedge.  Although my emotional side tells me I really want a paid for home (probably because my parents went bankrupt, although we never lost our home), I've decided to listen to my logical brain and I don't regret it so far.  I am earning way more on my retirement accounts than 3%!  My home is still cozy even when I owe the bank money to keep living in it.  I also owe property taxes and home insurance, which I'm not going to drop just because I paid off my mortgage.

    If you've been working hard at paying off debt, I think you should also work on something fun for yourselves, so you don't lose your steam.   What's something reasonable that you can make a goal that will make you feel rewarded for all your hard work but not sidetrack your progress by that much?

    Like 1
      • JennLynne
      • JennLynne
      • 2 wk ago
      • 1
      • Reported - view

      PhysicsGal I love the idea of increasing by 1% every once in a while! I think we could probably do a couple incremental increases per year, perhaps. We increased it recently and could plan to do that again next spring. 

      As far as the house and whether to focus on paying it off now or focus on retirement, I think I'll check into what my credit union can offer me. I bet the closing costs on a refinance would be minimal. 

      Love love love your last piece of advice... I had totally forgotten about the reward part! Can't wait to brainstorm about that with hubby a bit tonight. Something fun (and reasonable! You're right!) would be just the thing about now. Thanks for the reminder!

      Like 1
  • Don't forget to reward yourselves for your hard work.   You could do anything from a nice dinner to a vacation.  Whatever works for your budget and your lifestyle.

    Like 1
      • JennLynne
      • JennLynne
      • 2 wk ago
      • 1
      • Reported - view

      Cash I know I'm on the best finance forum ever when two different people remind me that a reward is in order after paying off debt! Thank you! 

      Like 1
    • nolesrule
    • Stealing From the Future fix is an improvement but is incomplete....
    • nolesrule
    • 2 wk ago
    • 2
    • Reported - view
    JennLynne said:
    You nailed it, the mortgage is 6% exactly.

     18 years ago was around the time we got our first mortgage and we were at 6%. 😄 We're on our third house and seventh mortgage now.

    JennLynne said:
    It's just hard because I'm wanting to be completely totally out of any debt whatsoever!

     I understand the feeling. We're about the same age as you.I do put a little extra against our mortgage payment to scratch the itch to do something, but with interest rates so low I just can't justify throwing much at it.

    Like 2
  • JennLynne I've got nothing to add to the excellent advice above.  But I did want to jump in and congratulate you on this major milestone.  Go you!! 

    Like 1
      • JennLynne
      • JennLynne
      • 2 wk ago
      • 2
      • Reported - view

      Yes I can Thank you so much! It's a little surreal, actually. We've been in debt so long that I have to remind myself we've actually achieved our goal and gotten out from under that huge load. Good to finally be here!

      Like 2
  • JennLynne I'll let all of these excellent community members keep on keeping on with the excellent advice, but I just wanted to jump in and add to the congrats! I love that you're so motivated to keep the momentum (and you will!), but I'll add to the calls to celebrate, too 🎉

    It can be overwhelming to pick a next step or priority after having tunnel vision on debt paydown - I've been exactly where you are. With so much intention behind your actions, I know you'll find a balance that works well for you!

    Like 1
Like2 Follow
  • 2 Likes
  • 2 wk agoLast active
  • 16Replies
  • 150Views
  • 7 Following