[quote=matt]Thank you all for you thoughts and comments. What would I do with the cash if not pay off the house? I’ve thought about trying to build a small real estate portfolio. I also have 2 young kids that may need help with college one day so i’ve thought about opening 529s, purchasing long term care insurance, or investing in the markets.
My other assets roll up to about $200k and are sitting in funds in my former 401k as well as former company stock. While i’m clearly very very fortunate to be in this position of accumulating cash, i’ve been parking my current earnings in low interest CDs/savings accounts due to a concern that this assignment may not play out long term… and the fact that I could be back in the US unemployed at a moments notice.[/quote]
I agree with some others that under your specific circumstances, probably paying off your mortgage isn’t the best idea. I did but I already own a fairly extensive real estate portfolio all generating cash flow each month. So your idea of building up a cash generating real estate portfolio is a good idea.
However, you just have to be careful where you buy and also have a GREAT property manager because you can start a real estate portfolio but have it shoot you in the foot if you have a horrible property manager. It can end up costing you money. I’ve seen it many times before with other real estate investors. I can tell you that real estate rentals are NOT for everyone.
But if you play it right…it can be GREAT and you can generate great ROI. What I do is not spend any of the money from cash flow via rentals and just take that money and continue to buy real estate each year adding on a property or two each year. To keep me from going crazy or taking on more than I can chew…I wait to purchase until I’m able to afford a property purchase free and clear with no mortgages or loans. That keeps me more realistic and really makes me think if I really want a property or not.
I know other real estate investors or gurus will advise the reverse and advise you to take on as much leverage/debt as you can to leverage your position. Right now with debt so cheap of course you can leverage but I still prefer waiting until I can afford a property in cash. Leveraging can be used beautifully but it can also get people in trouble if they aren’t careful.
Setting up a college fund is a good idea. I have 2 small kids and I did that and contribute to it each year.
Investing in the stock market is a thought as long as you’re not too aggressive and not investing in really volatile assets. I’ve seen some investors sticking their cash savings in super volatile ETF’s and commodities like Silver that have been crazy volatile and they get spooked easily. So if you invest it in the stock market, do yourself a favor and invest it in a portfolio you won’t lose any sleep over. (Personally I feel the stock market is overvalued).
Having a “rainy day fund” is a great idea in this kind of environment. My personal philosophy is have at least 1.5 to 2 years worth of savings built up before making any HUGE purchases or using big chunks of cash like this.
I’ve also been parking lots of cash in some CD’s and savings account. Do yourself a favor and check out some of the checking accounts that give you American Airlines miles. Some of the banks have been changing the amount of miles. Up until a few months ago I was getting 1 mile for every $10 in savings so it was great! Getting over 100,000 miles a month. The beauty is that frequent flyer miles aren’t taxable and interest in CD’s and savings accounts are.
Both banks are FDIC insured and you can get around the $250,000 FDIC limit by adding on POD beneficiaries on your account. You have kids so this is very easy to do if you have funds in excess of $250,000.
So with interest rates so low it really is great! Bank Direct and BBVA (former Guaranty bank) both were offering 1 mile for $10 in savings but they have since reduced it. Now I’m getting 1 mile for every $18 in savings but still banking a lot of miles. If you use them for upgrades on international flights, you can really make them pay off as some tickets on international routes are up to $10,000 in business. Of course if you don’t travel so much it’s not as valuable but I travel quite a bit and it’s been wonderful and a great ROI.
So these are just a few ideas for you. I think there are some good posts but in the end only you know your specific circumstances and situation. You sound like a realistic person and VERY rational simply by mentioning the unpleasant situation of possibly being unemployed. It’s been my experience people tend to think best case scenarios vs. worst case scenarios so my advice is think about worst case scenarios and act based on that.
