What to do with ex­tra money af­ter the bills are all paid

Porterville Recorder - - BUSINESS - He­laine Olen is an ex­pert on money and so­ci­ety and a reg­u­lar con­trib­u­tor to The Wash­ing­ton Post’s “Post Par­ti­san” blog. To ask He­laine a ques­tion, email her at askhe­laine@gmail.com

DEAR HE­LAINE: I am mar­ried with two young kids. Our only debts are our mort­gage and $45,000 in stu­dent loans at 5.5 per­cent in­ter­est.

For the first time, I'm mak­ing enough money to have the First World prob­lem of try­ing to fig­ure out how to pri­or­i­tize where it goes. I max out my 401(k) ev­ery year, and my wife and I have about six months in emer­gency cash avail­able if things went re­ally south. So, do I pay off the stu­dent loans? Do I in­vest it? Put it in a 529? Some­thing else?

I also have a small in­vest­ment in a small busi­ness, and there is the po­ten­tial to in­crease that as well. All in all, I'm just try­ing to make sure I am do­ing what's best for the long term with this money and fu­ture funds that come in. — FIRST WORLD PROB­LEM

DEAR FIRST WORLD PROB­LEM: I no­tice one thing you don't men­tion here. Is your wife also con­tribut­ing to or max­ing out her re­tire­ment ac­counts? If she isn't, I'd make that the first pri­or­ity. Oth­er­wise, I don't see your dilemma as an ei­ther/or is­sue. In­stead, I would think of th­ese dif­fer­ent goals as buck­ets and di­vide your funds ac­cord­ingly.

I sus­pect it will give you peace of mind to be­gin more ag­gres­sively pay­ing down your stu­dent loan debt. Do so. That's one bucket. It would also, I am guess­ing, give you peace of mind to open and be­gin fund­ing 529 plans for your chil­dren's ed­u­ca­tion. So put some money in that bucket, too.

As for the small busi­ness, I can't make that call for you. If you be­lieve it has real po­ten­tial for fu­ture growth, and its cur­rent rev­enues jus­tify an ad­di­tional in­vest­ment, that can serve as yet an­other bucket.

But there's one other thing, and it's the most im­por­tant: I no­tice you say noth­ing about fun here. As the cliche goes, man does not live by bread alone. While I would never en­cour­age any­one to in­dulge in life­style creep, I think, based on your de­scrip­tion, you could af­ford to take va­ca­tions, dine out or oth­er­wise in­dulge in a few ex­pen­di­tures that would make the en­tire fam­ily happy. Make sure you do so.

He­laine Olen Life and Money with He­laine

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