So I started writing this post today to let you know I had made a final decision on that $20k profit from last month (Hint: it was gonna be #2 below), but mid-way through I changed my mind yet AGAIN ‘cuz I had totally forgot about one of my yearly – and most favorite – goals. Which unfort. doesn’t have anything to do with investment properties or other exciting new adventures I’m afraid. Although equally as sexy ;)
I don’t know what you would do in my case, but read on to see where my thought process took me… maybe I’m a bit too conservative?
Option #1: The Investment Property idea
The last time we chatted about this, I was gung-ho on picking up an investment property with this money. The idea of virtually trading in my online property for a “real” physical one was fascinating the Dickens out of me, and after reading all of YOUR responses to it, and other bloggers’ posts who are getting into the game too, I was 80% sure I was about to bite. In theory it would be pretty simple – I use the $20k for a down payment on a $100k condo around here, and then rent it out and have them pay off my mortgage FOR ME and eventually turn a steady profit for years and years to come! The whole “have your money work for you” type of deal, yeah? (Donald Trump nods “yes”)
The thing of the matter though, was that I was ALREADY gonna be a landlord here in a handful of months anyways! By default! Cuz when we find our next place to move here in the next 6-12 months, we’re gonna be forced to move out of our house and rent it out as we’re still way too under water to sell the thing (like, $40,000 underwater). So why rush the experience and take the risk now, when it’ll fall in our lap next year? And with a house I’m already 100% comfortable with?
It became a no brainer to cross this one off our list and move on to the next best route for our money… one which I was CERTAIN would be the decision I was gonna announce to y’all today once the dust had all settled!
Option #2: The “Less Debt, Less Worries” Route
AKA get rid of all my expenses so I don’t NEED as much income anymore! AKA continue paying off my mortgage and knock down that (now) 9 year plan even lower! The less you owe, the less you need to make later, right? And $20,000 would do some major damage to our house debt – no doubt about it.
Combine that with all our other changes lately – merging of our accounts, combining all our savings – and we’re well on the one way to financial simplicity. Which means more time to think clearly and enjoy what the rest of this world has to offer (family, friends, babies!), as well as less stress and managing properties all over the place. There’s something to be said for more freedom, even if it means less money :)
We finally decided this was the best course for us – and I was JUST about to pull the trigger and make it happen – when all of a sudden I had an epiphany and totally realized we had FORGOTTEN about maxing out our IRAs this year! $hit!! That’s one of the most important goals!
(And thus created option #3…)
Option #3: The “Max Out All Your IRAs” Route
Between the extra mortgage pay offs and the baby stuff all over the place, it had absolutely slipped my mind that we’ve GOT to max out those bad boys just like we do every year. It’s the foundation of our retirement plans! (A friend once told me that his only financial goal is to max out his 401(k) and Roth ever year because after 30-40 years of doing that he would be one financially happy camper. And it’s true – do you know how much $20,000+ a year adds up to over time? A LOT. And that’s not even taking into consideration growth and dividends, etc!)
And because I got so carried away with life this year that I hadn’t been setting money aside each month for this, it means this may be our only opportunity to continue on with the mission of maxing these guys out this year. It’ll be hard to come up with another $20k on the side, that’s for sure. Unless someone else wants to buy one of my sites? ;)
So for the fourth time in a row, and the answer to today’s $20,000 question, we’ll be maxing out both of our Roths and half of my SEP Ira with the money – Woohoo! We have a winner!!!
Our Roths will each get $5,000 (the legal maximum), and then my SEP will get the remaining $10,000 plus more once I figure out how much I can dump into it at the end of the year (SEP’s are like 401(k)s for small biz owners who don’t have access to them, and the max you can put in is determined by a % of your year-end profit). It’ll probably slow down Operation Mortgage Payoff for the 2nd time this year, but right now I think it makes the best sense for us going forward. At least until I can come up with the next big thing ;)
And now I’m decision-making free too! Woo! I suck at making the big ones – takes me forever…
What do you think about this? Smart move? Safe move? What would YOU do with an extra $20,000 check if you sold something of your own? We obviously had a ton of going back and forth here ourselves, but ultimately I think it was the best one we could have landed on. They all had some damn good benefits, though, that’s for sure.
PS: Just an fyi that I wasn’t just handed this money either – I had to work my balls off for it over the years, which is why it took so long for us to finally come up with a solid plan for it. When you deal with winnings and other similar situations, I feel like it’s much easier to figure out what to do with it since it hits you at one time and hadn’t been building up over the years, ya know? Nothing against those who pick out lucky lottery numbers like a rock star :)
(Funny finger man by Tsahi Levent-Levi)
Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!