I don’t set goals. But I do get set in my ways. Since I’m so charming, it all works out. Right? Riiiiight. For more than the past year, we have implemented the exact same approach to paying down debt and investing–do both as well as we can. And it’s working. But I also wonder if it’s working as well as we think.
How We Destroy Debt
I won’t belabor the point here. Mostly because if I do, I’ll have nothing to write about for our Q2 mortgage update. But the very condensed version is this:
- Our mortgage is debt.
- Debt sucks.
- I want it gone*.
*And I want it gone much faster than the 26 years we have left on paper.
As a result, we currently double our payments every month and toss some extra side hustle money at it on occasion. That might will change now that we’re planning for Half Penny. Mostly because you all told me I had to. See, I do listen!
How We Invest
Currently, we use three different investment vehicles: pensions, Roth IRAs, and a taxable savings account. Of the three, there’s only really one that I would classify as truly investing. Because one is so tiny and the other might very well be a fantasy concocted by the state of Illinois.
Our Roth IRAs are our prize investments. Mostly because we’ve been maxing them out for a few years and also because I finally learned to stop having a stroke over every little blip on Vanguard. Which basically means there haven’t been many blips as of late, and I’ll go back to hyperventilating or having Mr. P change my password if and when the correction comes. Be cool, stock market. Be cool.
Then there’s the great experiment: our taxable savings account. You read one Bogglehead book and suddenly you’re an expert. Just kidding. I’ve read it 2.5 times, and it still makes me want to cry in some parts. But this account is basically a way for us to test the waters beyond our Roths. We’d like to earn more than 1% on our savings, so we opened the account. But we’ve been slow to funnel money into it because two people in grad school can be really expensive. Ditto for babies. While we do try to grow this from month to month, we don’t currently contribute a set amount. It’s more like whatever is leftover.
And now the fantasy. Unlike Beetlejuice, the more someone says the word pension, the less convinced I am that it will ever appear. The state already pulled the plug on one part of our pension and kindly gave back all the money I put into that small portion over the past nine years. Sans interest. Because Illinois is fun like that. Currently, we both put just over 9% of our salaries towards each of our respective pensions. There’s no match. Zilch. Zip. Zero. And the truly scary part is I have no idea how it’s being invested. Or if it’s being invested. Truth be told, the last time my account was updated was in 2015. So maybe I’ll be in my 60s and realize that I’ve got it made in the shade thanks to my pension. But my fear is that it’s going to be a lot like opening a box of Girl Scout cookies expecting a jackpot only to realize there’s one left. Not that that would ever happen in our house. Right, Mr. P? So maybe pensions aren’t that sweet after all.
Is This The Right Approach?
Just typing this all out in one post makes it really seem like we have this debt and investing business all figured out. OK, maybe not all figured out. Maybe not even close. But we’re making a little dent. The real question, though, is could we be making a bigger dent if we focused more singularly?
We can’t opt out of our pensions, but we certainly could forgo the Roths. Though, just typing the second half of that sentence made my palms sweat. It seems that the only option worth considering would be to skip the taxable savings account or even cash it out and use it for other obligations.
The flip side, of course, is to cool it with the debt repayments. The thought of being shackled to a bank loan until my kid is out of college is more than a little repulsive to me. But imagine if we had taken all those extra payments and we’d tossed them in our taxable for the past year or two. Market magic. But what if we made the same decision in 2008? Or even when we first opened our Roths with Vanguard and couldn’t get out of the red for anything? There’s no timing the market. It’s just one more question mark in life.
So Tell Me…What path do you choose? How do you make your money work for you if you have debt to pay and investments to make?