When our house sold after less than two weeks on the market, my husband and I found ourselves in a situation most couples only dream about: we were completely out of debt for the first time in our adult lives. It was an amazing feeling, but it left us with a major shift to our monthly budget, as well as a major question: what should we do with the extra money?
Right now, we’re living with family while we search for our “forever” home in our new town. The result is that we don’t have a mortgage payment, only the token rent we’re paying to our family members (against their wishes; they didn’t want us to pay them at all, but we insisted – it felt like the right thing to do). We’re not paying an electric bill, natural gas bill, cable bill, or much of anything in the way of utilities. We suddenly have about $2,000 a month extra in our household budget, and we’re not exactly sure what to do with it.
Part of me thinks that we need to put it – all of it – into our down payment fund for our dream house. After all, the only reason we’re saving this money is because we sold our house quickly (and, it should be noted, at a loss). My first thought is that we should dedicate all the extra money we suddenly have in our monthly budget to housing costs, since that’s what it would normally go to anyway.
But we don’t have a dream home in mind right now, and watching all that money sitting in our savings account, earning next to nothing is relatively depressing. I keep yearning to figure out a way to make the money grow, without jeopardizing its very existence – meaning investing it in the stock market is out of the question. At the same time, I need to be able to access that money quickly should we find the perfect house, making a 12-month CD pretty unrealistic, as we will probably be buying in the next six months or sooner. And have you see the rate of return on a 3-month CD? You’re better off burying your cash in a tin coffee can under that old oak tree in your backyard and hoping it sprouts roots.
As I contemplate our household budget dilemma, I can’t help but thinking what it would be like if we were really out of debt – ie, if we were debt free and owned our own home. What would we do then with the extra cash we’d once devoted to a mortgage payment? It’s a question I’m likely a decade or more from facing, and it’s a situation I can’t wait to be in. When that time comes, I know I’ll be wavering over whether to put the money into something responsible like my retirement account, or tour the globe like I’ve always wanted.
When you paid off one debt (or several!), what did you do with the extra money in your monthly budget that once went to those expenses? What would you do in my situation?