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[paddington_bear]

For the next 6 months, I'll be making about $600 a month extra, due to a new, temporary responsibility. I don't have any car payments or student loans, and I pay off my cc bills every month. I have about $5k in savings, and I max out my Roth IRA contributions every year.( I should double-check my and my school's retirement contributions.) I'm single and don't have any kids.  I lived within my means before this extra $600, so I'm not really that interested in upping my standard of living. (After the 6 months, my base salary will increase by about $300/month.)  I intend to buy a new computer this month, but I'm trying to find something more responsible and long-term to do with my money. Should I make extra mortgage payments to get more equity in my house and start paying off my principal? (My mortgage is more than the extra $600 a month, so every other month I could make a full extra payment.) Should I boost my savings some more? Or, I could just sock the extra money away in my savings account and, after six months, take the money - augmented by some more from savings - and maybe buy a Vanguard/Fidelity/what have you mutual fund of some sort. Any thoughts?

[larryc]

Paris.  Don't think twice, Paris.

[paddington_bear]

Larry, people on so many threads make comments about how helpful and smart your advice is to various people on the fora.  That has never been more true than now. :) Can I get to Paris for $600?  I guess the better question is, how much money do I need to stay in Paris for enough time to enjoy it, and to come back? (I was in Paris for two days once.) Truth be told, if I had the nerve to go by myself, I've always wanted to go to Amsterdam.

[dalekk]

You're talking about an extra $3,600 in total, right?  If you only have $5,000 in your liquid savings, I would just stash it there.  $5k seems rather low for an emergency fund.

[chaosbydesign]

Larry, people on so many threads make comments about how helpful and smart your advice is to various people on the fora.  That has never been more true than now. :) Can I get to Paris for $600?  I guess the better question is, how much money do I need to stay in Paris for enough time to enjoy it, and to come back? (I was in Paris for two days once.) Truth be told, if I had the nerve to go by myself, I've always wanted to go to Amsterdam.

If you saved the money for a few months you could get a trip to Europe out of it. If you go to the right area, Amsterdam is definitely a place you could go by yourself.

[paddington_bear]

You're talking about an extra $3,600 in total, right?  If you only have $5,000 in your liquid savings, I would just stash it there.  $5k seems rather low for an emergency fund.

I probably should have added that $500 goes into two different savings accounts - $150 in one account and $100 in another, every pay period - every month. Shouldn't I have more in my savings accounts now, then, you might ask. Some of it was depleted when I paid to get my house painted last summer.

[systeme_d_]

Hello Amsterdam!

[melba_frilkins]

Does no car payments mean that you have no car or you have a car that is paid off? If the latter, how long until you'll need to replace it? It's sweet to have a large down payment ready to go for the next one.

That or Morocco.

[paddington_bear]

Does no car payments mean that you have no car or you have a car that is paid off? If the latter, how long until you'll need to replace it? It's sweet to have a large down payment ready to go for the next one.

That or Morocco.

Great question. And a new car is on my wish list. I have a 1996 Honda Civic. It doesn't even have 100K miles on it; maybe it has 86k. I live in a small town, live about a mile from school, so I walk to work 3-4 days a week.  It drives fine, so, barring some major accident or event, I imagine that I'll have the car for another 5-10 years, unless I just bite the bullet at some point and buy a new one without waiting for this one to finally die.

[larryc]

Save it up for a few months and spend it all on a great trip.

It seems to me that you are pretty much an exemplary financial manager. You are going to have a comfortable retirement. But in the end, all we really have is our memories of the life we lived.  Time to make a deposit in that fund.

[pigou]

If you've always wanted to go on a trip to Europe, that's what I'd do with the money. I'm all for budgeting and retirement planning, but like others have said: experiences count for something, too.

I'd consider adding to your retirement savings when your base salary increases, however. Vanguard has lowered the minimum to invest in their target retirement funds to $1k, so you could start up one of those in 3 months and put the $300/month there. I think they waive the minimum if you commit to a monthly deposit.

Most people greatly underestimate the amount of money they need for retirement: the matching available by employers is not sufficient to accrue enough savings. Conservatively, if you want $30k/year in today's dollars (real terms) when you retire 20 years from now, you'd need to draw $60k/year (in 2032 dollars) from your account. Worse, 20 years in retirement (2052), you'd need $120k/year to maintain the same lifestyle, and you'd likely see another doubling within your lifetime. At that point, $30k nominally would be less than $4k. Most people use nominal rates of return and project their future needs in today's dollars - a recipe for disaster.

[clean]

BEGONE YOU SPENDTHRIFTS!!!

As I understand the post, you have a mortgage, and only $5000 in liquid money.  According to Suze Orman you should have 8 months of expenses as an emergency fund.  I doubt that you have anywhere close to that, and I doubt that even adding $3600 (6 months * 600) will get you there. 

You can not afford to pay off the house, you can not afford to go ANYWHERE but to work. 

My house is only 10 years old and I had a major issue with rot near the eves (seems the builder used the wrong paint and water got in, but could not get out).  So $1500 later, I have repaired the problem.  That would be a big chunk of your savings.  Hell, a hot water heater would blow 10% of it, and an AC maybe 20% if you are lucky.  Though your car is relatively young, an AC there would easily cost you 20% of your savings.

I dont know about you, but our health deductables just went up to $700, and the copay went to 30% from 20%.  One hernia operation would pretty well 'hurt'! 

Trip to Paris?  Yea, have fun... Summer sleeping without AC (or hot water)?  I dont think so.  You dont have an emergency fund capable of handling an emergency. 

Get the emergency fund set, and start saving for a new to you car.  Ive been saving $250 a month and now have over $12,000 for the replacement of my 1995 Toyota Avalon.  A small amount over a long time does not hurt, and  it sure adds up.

[dalekk]

Clean,

That's what credit cards are for!!!

[paddington_bear]

clean, thanks for the dose of reality!  But between you and larryc, I don't know if I should be fearing the poor house, or patting myself on the back for being in a good financial situation! The $3600 added to savings, at the end of 6 months, actually would get me over the 8 months of expenses.  And I do think that I can afford to go somewhere other than to work. Maybe not to Paris, Amsterdam, or Morocco, however!

[clean]

Really?  Your expenses are $1000 a month?

Property taxes, insurance, food, electricity, water, gas, Mortgage!, phone, internet, cable, ...  And you can cover 8 months of these expenses with a grand total of 8600?

Remember, an emergency fund is not for investments or anything else.  It is above and beyond car savings, investments...