Wwyd with ths $$

[Monarch]

we invested in a friends business, and it looks like he will be selling this summer, netting us about. $150- $200k depending on how much he sells it for. Our budget does not allow us to pay extra on our debts right now.

WWYD with the $$?
1. Mortgage $385k. 18 years left, $2400 / month at 4%.
2. Car $24k balance, loan at 3.6%, we pay $550/month
3. Recreation property $55k balance on a 15 year mortgage at 3.9%
4. Retirement savings. We are currently at 2.5x base salary, in our late 30's
5. Invest in our home by putting in hardwood floors, as our carpet will need to be replaced in the next few years.
6. Invest in friend's next business. Expecting a minimum investment of $50k. (just a guess, the other business had a minimum of $20k, we put in $24k). Likely a 3-5 year time horizon before he'd sell again.

I am leaning towards the minimum for 6, then 3, then 1.

WWYD?

I have to run so if there are questions I will answer them when I get out.
Thanks

[mrs.spunky]

I'd pay off the car (depreciating asset) before your primary mortgage.
6, 2, & 3 add up to $129k. That leaves you with $21k, using the lower figure of $150k. You could put $10k into your IRAs for the year, leaving you with $11k for the floors.
Also consider if you wish to pay down your primary mortgage, you will have more wiggle room monthly if you don't have the car loan and recreation home mortgage.

[rubytue]

6, 2, 4 in that order. Maybe 5, but I wouldn't call that an "investment" as much as I would a want. Which is fine.

But I don't believe in paying off a mortgage. If you did 6 and 2, you'd have roughly $100k left. I'd rather have enough in the bank I *could* pay off the mortgage, but instead have the money liquid and earning returns.

[80sjunkie]

Congrats on having such an awesome friend!

The mortgage helps you come tax time so I wouldn't necessarily want to pay it off first. In general your interest rates are low so I'd probably invest in your friend's new business and then take the remainder and invest it. I'd max out all retirement options first (401k, Ira, Roth or otherwise). Also, if you want hardwood floors, get them. There's nothing wrong with spending some of your money on a want.

[Monarch]

Another option would be to put more than the minimum in his next business. We were the smallest investor in this business. There will be a few new millionaires soon.

The reasons I didn't want to put it on the car is because that would feel like 'wasting it'
But maybe that's silly.

[Monarch]

May 18, 2012 9:55:05 GMT -5 80sjunkie said:

Congrats on having such an awesome friend!

The mortgage helps you come tax time so I wouldn't necessarily want to pay it off first. In general your interest rates are low so I'd probably invest in your friend's new business and then take the remainder and invest it. I'd max out all retirement options first (401k, Ira, Roth or otherwise). Also, if you want hardwood floors, get them. There's nothing wrong with spending some of your money on a want.

Thanks. Our registered retirement accounts are all maxed. We currently save >20% for retirement.
I should add that my net number is also net of DH's sports car that he's been waiting to buy :-)

[SJ]

May 18, 2012 9:55:05 GMT -5 80sjunkie said:

Congrats on having such an awesome friend!

The mortgage helps you come tax time so I wouldn't necessarily want to pay it off first. In general your interest rates are low so I'd probably invest in your friend's new business and then take the remainder and invest it. I'd max out all retirement options first (401k, Ira, Roth or otherwise). Also, if you want hardwood floors, get them. There's nothing wrong with spending some of your money on a want.

This is my thinking as well.

The only debt I might pay off is the car, assuming you can handle all the payments easily in your budget from a cash flow perspective.

[Deleted]

I vote for 6, 3 and 2. Then use the excess to do new floors, invest more in the next business or a combination of both.

[SJ]

May 18, 2012 9:59:12 GMT -5 @Monarch said:

May 18, 2012 9:55:05 GMT -5 80sjunkie said:

Congrats on having such an awesome friend!

The mortgage helps you come tax time so I wouldn't necessarily want to pay it off first. In general your interest rates are low so I'd probably invest in your friend's new business and then take the remainder and invest it. I'd max out all retirement options first (401k, Ira, Roth or otherwise). Also, if you want hardwood floors, get them. There's nothing wrong with spending some of your money on a want.

Thanks. Our registered retirement accounts are all maxed. We currently save >20% for retirement.
I should add that my net number is also net of DH's sports car that he's been waiting to buy :-)

OK then I'd invest in the next business, pay off your car, and save/invest the rest. Oh yeah, and buy the floors.

I'd also probably take a fun trip somewhere to celebrate, but travel is my thing.

[mrs.spunky]

I personally wouldn't be putting more than the minimum into the new business venture. Perhaps, the next time, if you have the other things paid off/down, I would consider that. I would hate to risk, say, $100k of what you net from this investment, and lose it in the next one when you have a car payment, a second home, etc. to pay off. However, having the "extra" to invest in the first place is a problem a lot of us would love to have! Good luck!

[M]

I'd pay off the car, max out retirement, set aside $50k for the new business, buy the floors. That'd leave you with about 100k left. I'd put 50 in some kind of riskier investment and, assuming you have a healthy efund, 50 in something less risky but has averaged 4% returns in the past. If it less than 4% than you're better off putting it towards your mortgages.

[Deleted]

6, 2, 4, 1

I wouldn't buy a vacation house while you still have debt. Maybe be save that for the next time you cash out.

[Monarch]

Interesting that everyone is advising to pay off the car.

We really want to be smart with it as this is a big inflow for us... I am also surprised and happy to have your blessings to do the floors :-)

I think we will invest $50k in the second business, then pay off the recreation property, then pay off the car, then invest whatever is left after that.

We can use the $10k that we would have paid on the two loans over the next year towards the floors, since we can live another year with the carpet. I think each of us essentially getting a new car out of it is enough 'fun' spending.

[Monarch]

I should add that the reason I want to pay off the recreation property is because I feel it weighing us down for some reason. I just want to enjoy it free and clear....

[auberge]

I would do 6, 2, 5, 4 in that order and save or invest the rest for another rainy day.