Help us weigh financial priorities.
April 9, 2014 5:00 PM Subscribe
My family's income has just increased, and we're having trouble choosing between financial priorities. Advice?
posted by anonymous to Work & Money (17 answers total)
We're in the fortunate situation that our income just increased, both from a bonus and a raise. The challenge is that we're having trouble choosing how best to use this money and going round and round in our discussions about this.
Our retirement savings are in very good shape, so that's the one thing we don't need to tweak right now. The things we'd like to do and are having trouble choosing between are:
1. Increasing the emergency fund. This currently is at about 1/3 the usual level due to recent urgent spending.
2. Paying off low-interest debt. We owe about $50K between a car loan and home equity line of credit, both at low interest rates (3% and 2.7% post tax). The payments on these loans are manageable for us.
3. Increasing college savings for our kids. We have a 529 plan but aren't funding it at a high level right now. We put in a few hundred dollars a month, when various online calculators suggest we should contribute more like $2K per month if we want to fully fund private college for 2 kids.
Of the two adults in our family, one tends more toward the debt-averse (and so wants to pay down the debt as quickly as possible), and the other tends to emphasize savings more and favors a larger 529 balance to give it more time to appreciate (and points out that low-interest debt is not crippling). The recent bonus would be enough to completely pay off the car loan, eliminating one monthly payment.
If you've been in a similar situation, how have you chosen between different financial goals? Or can you give us advice on how to weigh the different priorities in our discussions?
Anonymous because of the financial details.