Hi Jennifer, like Vivi said, lots of different opinions out there.
My question is… do you really need the whole $10k in EF? Can you shoot for just a “basic essentials” EF i.e. if you were unexpectedly laid off (you will receive unemployment benefits as well), etc., etc. Basic essentials meaning just to help cover mortgage/rent, utilities, food, etc. (so perhaps you can shave it down to $7.5k?) Secondly, do you have a back up plan like a family member that can support you for a few months in case of an emergency? Thirdly, maybe ask a family member to borrow some cash w/ 2% interest & monthly pay back plan (you’re saving 2%, they’re earning 2% (tax free & HYSA is only at .50%), win-win situation for both parties). During the market crash last March, I borrowed some cash from my sister and paid her back in 3 months plus interest (I used that money to buy a lot of stocks for a discount & I’m up huge now). These are just food for thought… to help you think outside the box or w/ a different “lens”.
In my current situation, I took over my parent’s HELOC debt (3.99% simple interest) in November of 2020. There was an experiment done on Mr Money Mustache’s blog about a mortgage payoff vs. investing in the market (the stock market was winning). I did my own experiment and instead of fully paying down the HELOC, I poured $20k into the market (VOO, ARKg, ARKk). Currently, I’m up as well and I strongly believe I will be up positive in the short, medium, & long term. I would not recommend anyone to take out a loan to do this but I was in a unique situation & had the opportunity to do a real life experiment. I definitely feel that there is some stress of having this debt & paying it off would a good choice as well. I am looking to pay this off in 11-13 months if not sooner…to be determined.
Bottom line, go with your gut. Whatever decision you make, it’ll be the best decision. Take everyone’s opinion & advice with a grain of salt because they are not in your situation. By the way, I started at age 42 w/ only $49k in retirement and $0 in savings/investing. I’m 49 now & I’m at $847k. Many thanks to Jeremy/PFC team for providing really sound, solid advice for me during my FI journey. So smile, $2.5K at age 33 is ALOT of money.
