John and I are still somewhat worried about our job security although having survived 3 rounds of layoffs (me) and his hours cut by 2 days a month, we think we will probably be ok.
Additionally, we are in the middle of refinancing to take advantage of the lower rates. With a 2.675 point buy down, we can get 4.375% as of yesterday. We are all approved to go but have yet to lock in - I will probably do so soon but I'm nervous wondering if there will be another rate drop.
Anyway, with the refinance, we are also taking a cashout to pay off ALL our other debt - our new car loan, creditcards (all of which have always been at 0% but those 0% offers are disappearing fast!) and student loan. This will lower our monthly payments by a little more than $800. At first I had just planned to use the surplus to aggressively pay down the principal and get the house paid off in 10 years or so, until I started running the numbers of what investing that same amount would get us. I was blown away! We would be idiots to pay down the principal at a cost savings of 4.375% when investing the money over time can get us a return of 8% conservatively and more likely in the range of 12-16%. Not to mention, the money would be there if we needed it, whereas cashing in on equity in your house is much more difficult. And with 25-30 years until we retire, we will still have the house paid off by then anyway.
So, for the first time in our lives, we are finding ourselves with a monthly budget surplus. We have been doing pretty well month to month and have even managed to save some money over the last year while still making some decent retail purchases.
So for the first time in our lives, we are in a position to start some serious savings. As a public employee with Oregon pers benefits, I will have a pretty decent retirement already. Add to that the fact I have been contributing over the years to other retirement accounts as well, not alot, but currently about $200/month, and we are not in bad shape for retirement without the additional money. We still plan to increase our retirement contributions significantly, but even if we did an additional $400/month ($600 total) that leaves us with a MINIMUM of $400/month to savings. I am actually thinking we will be able to swing an additional $800 or more most months.
While we want to increase our liquid savings, it is obvious that within a year we will have more than we really need in liquidity and with current interest rates at a maximum of 1.75% (traditional CD) it doesn't make sense to just put it all in savings. So I think we are going to be opening an investment savings account for the first time. I feel like over the last 48 hours I have been cramming for finals, trying to learn the basics of investing! Up until now, I have just done the standard retirement accounts, not having to really worry about how it works. Savings investments are a whole different ball game. I am leaning toward Hartford which the investment advisor at our bank suggested. The individual who runs the account has an excellent track record. I am still nervous as this is brand new territory for us, but I am excited about the prospect as well. Particularly with the markets so low right now, I feel like this is the perfect time to get started.
So, do you have any investment savings other than a retirement account? What has worked for you? Any advice or good reading suggestions would be appreciated!
