pay more on house or put more in savings

[bornthrifty]

we have done the debt snowball of Dave Ramsey,
now we have an extra dollar or two that I want to put to good use,
would you work on putting a little more on the house, (knowing that you may want to move someday, and don't want to be upside down in the future if things continue to slump) or saving a little more in the bank , or under the mattress...
or would you just buy tangible goods because the dollar is doing so cr$##y

thanks for your thoughts!

 

[patandchickens]

In most cases I think it makes sense to put it towards your house (if your mortgage structure allows it), as long as you have a reasonably adequate emergency fund already established. (If not, I'd work on the emergency fund). YOu make a much higher interest rate, effectively, by paying down the mortgage than by whatever piddly rate you can get out of a savings account or CD or even mutual fund. And it gives you more breathing room for the future.

I would not buy tangible goods beyond what is required for your normal life. That's generally just 'money down a hole'.

JMHO,

Pat

 

[FarmerChick]

you must have the cushy savings acct. already in place....if not then save the money to have that fund

if you have a cush savings, then put the money into the house

or make a specific fund for savings---like a new car, wonderful vacation fund, etc that way you can pay all cash for that item whatever it may be and you are ahead of the game


edited to say

I have an emergency fund I never touch

I also have a savings fund for "small emergenicies" built up like if I need a new furnace or something

I also have my vacation fund....I pay all my camping vacations in cash

so I have alot of accts that do different things lol

 

[Wannabefree]

Fully funded Emergency fund first. That is 3-6 months equivalent of bills sitting in the bank(this saved our home!) and then consider the mathematics.

If you decide A: Put money on principle payments..depending on your interest rate, you will very likely get more bang for your buck by going this route considering interest rates on savings the banks are dishing out these days are at best 2-3% whereas you could be saving mortgage interest of 5-10% depending on the rate on your loan.

OR

B. Beef up the savings accounts just for security and peace of mind knowing that the money is there if you need it.

Here's my personal take..my "real life story."

We had Emeregency fund fully funded for 6 months. I paid a LOT of principle payments on our home during this time when DH was working and we had that wad of cash in the bank. HOWEVER, when the ice cream turned to poop...we went through that EF in 6 months...but the emergency wasn't quite over....we jumped through hoops to get our mortgage payment every single month and never knew from one minte to the next IF we were going to have it or not. DH was laid off for a year and a half before going back to work. We fell a few months behind. Times were TOUGH...Christmas was Charlie Brown style which was fine, mind you, just not as we had hoped. Anyway, had we put the money in the bank in savings instead, we would have easily gotten through because I had sent several thousand more into paying on the principle. That money, for our circumstance, would have been better used as payments. But, we made it, and have come out on the other side strong, wiser, and closer for the experience.

This economy is bleak, and getting worse. I know and can quote word for word just about everything Dave would say, and I'm telling you right now...his plan is not the best for these very very lean times. We are stockpiling for harder times even though DH is back to work now, and I am working from home. We are looking at our future, and part of that IS paying our house off, but first comes the other necessities, and our little insurance plan in the form of emergency preparedness for food. Our contingency plan will be soon set up, and we will go back to paying principle payments as large as before, until then, we're getting our ducks, chickens, goats, and everything else...IN A ROW Once that stuff is established, we'll be right back on the Dave track!

We are also debt free except for the house. We are not currently worried about the other baby steps. We have put our own twist on them. Our savings is in the form of food, should prices skyrocket, we will be just fine. In a sense it IS financial planning.

 

[i_am2bz]

You sound like me, FC! I have:

Checking account for normal expenses;
A 6-months-expenses-in-case-I-lose-my-job account;
Vacation account;
Emergency car repair/broke washing machine/etc. account;
REAL emergency/TSHTF account (money under the mattress!) account.

I keep telling myself I'm going to put anything else into my mortgage, but something keeps happening to my emergency account that brings it below where I'm comfortable.

 

[me&thegals]

It depends what is the better rate. If your mortage is lower than what you believe you can earn in savings/CD/stocks, etc., then don't pay down the mortgage. Is your mortgage adjustable rate? Fixed? What are your options for savings?

 

[patandchickens]

It depends what is the better rate. If your mortage is lower than what you believe you can earn in savings/CD/stocks, etc., then don't pay down the mortgage.

Although you have to remember that the two things are not quite equal. By paying down the mortgage you get PERMANENT 'safety', whereas some forms of investment can go down as well as up (including most of the ones likely to be competitive with your mortgage rate) and furthermore paying down the mortgage leaves you less vulnerable to future "bumps in the road".

Personally it would have to be a pretty substantial difference between the number of the two type things for me to *not* pay down the mortgage.

Pat

 

[On Our own]

I am with wannbefree on this one.

We had a good savings account going a full year worth of mortgage payments untouchable. And good thing! DH got laid off. We've actually been OK. He is a really hard worker and took whatever over under table job he could get. I took on lots of part time jobs just to pay COBRA. But, we're mostly out of the woods now. He has been working a contract job since Late August.

Since then we have rebuilt the larder. We went over two months without hitting a grocery store for anything other than milk. (working on that one)

Food prices are balancing between deflationary and inflationary pressures right now. So, as I can we stock up. The savings account is down to about 6 months worth of payments now, but I won't pay extra and we're not working on resupplying IT until we resupply the food and other things we let go.

Chicken feed is going to go up so we're stocking that, everything we need to be self sustaining as long as possible first..... Then back to the bank. Then extra on the mortgage. We, too are debt free other than the house.

 

[journey11]

I would set back an emergency savings first, about 6 months pay. That way if something happened (job loss, sickness, etc) you would be able to continue making your house payment until things got back to normal. Paying extra on your mortgage is good, and you should do it once you have that emergency savings set back.

Putting the money on the mortgage now, while noble, will not help you out or give you any leeway if something happened that you could not make your regular monthly payment and you wouldn't want to lose your house or damage your credit if the unexpected happened.

 

[Mackay]

At this point I would not pay down on the mortage. No telling what is going to happen with this economy. If you end up in forclosure due to loss of work or other economic issues you will need your money in your hand not in a house that has lost value and that no one can buy and that you may not be able to support any longer. If you have to walk away from a house you walk away from all you have put into it.
Make sure you are down to rock bottom as you can go on interest rates..