Quote:
Originally Posted by Sagi_AFF
The part I have a problem with is that he is using money that he can't afford to lose. If he can't afford to lose it then that means he doesn't have much money elsewhere. So why trade a liquid form of money for something that he won't see until the he sells his house or gets 25 years into his loan? He might as well keep the money as cash and have it if he ever needs it to pay his loan or for any other surprises he has.
That should be his first priority with his extra money, build a 1.5 - 2 year emergency fund that can be used to pay all his monthly bills. Then if he invests the rest of it in something that is better than his effective 3.8% loan he'll still have liquid cash.
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HELOC - I don't know why you missing that. Again depending on the situation, if he is paying more equity in his house, he guarantees that he saves money from having to pay as much in interest. There is a HUGE difference between paying down your mortgage and buying stocks. First of all he shouldn't use money he can't afford to lose - meaning its gone, the stock tanked he lost money. If he puts it into his house and has an emergency he call pull it back out through a HELOC, if he is worried about doing a HELOC then just pay the min each month and put more money in your emergency fund.
yes first thing to do is build emergency fund but 6 months is a good start. Then pay off all high interest debt, then put money away for retirement.
There is two ways to make money, you don't always have to make money by making money, you can also make money by reducing costs if you follow what I am saying. Sorry guys I really don't have time to debate this in *general* for his situation it is pretty clear what he should do.