With this year pretty much on auto-pilot for our finances (know the order debts are being paid off and when, income set for the rest of the year unless we add a new revenue stream), I've been thinking big time what is the path we go on after these CC and misc debts are paid off and we have $9K in our emergency fund. It's still a year away, but I figure now is the time to start planning. Here's the paths I see available:
- Pay down student loan and mortgage debt: This has a guaranteed return on investment of 6% overall. I know I really want to get our mortgage under 80% to get rid of the $71/month PMI, which will take $10K
- Invest in the stock market (eg: S&P 500): I forget the exact long-term average for S&P 500, but it's like 10% in the long-term.
- Build a business: We've got several ideas floating around over here that would require some, but not much money to get started. The chance for losses and gain are large.
- As my wife describes it, go back to our old ways and splurge. This has a guaranteed return on investment of 0% to -30%.
It's probably going to end up being a mix of the first 3, just finding the right balance will be the hard item. Our goal is retirement at 42, though theoretically I'll be halfway to retirement in a year (currently living off 50% of my day-job income, the other 50% is going to those debts right now).
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I just finished a book that may be helpful for you to read. Its called "Stop Working" by Derek Foster and is basically about building a portfolio of quality companies that offer an increasing quarterly dividend. Once you build up enough shares you can live off the dividends that stay the same weather the stock goes up or down.
He is Canadian, as am I but he talks a lot of US stocks mainly because most of the high dividend paying companies are in the US.
It is a short read, I finished the book in 4 hrs and it is a nice change from the books that say you need to make millions before retiring.
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