Would you overpay your mortgage?

[D_Odds]

@Bill_Door

I agree with Dangerosa, you need at least 6 months take home pay in a liquid account, money market or savings. After that I’d start investing in the market. In your case I’d recommend low fee index funds, Vanguard has quite a few with different portfolio styles and varying minimums, but in most cases substantially lower fees than most brokerage houses.

I used to think the same about Index Funds. Now, if I were still investing in indices, I would opt for ETFs (exchange-traded funds) bought through an eTrade (or other low cost) account. Two ways to the same goal.

That said, I’ve since switched to passive income investments: DRIP stocks & rental real estate*. You can get involved in DRIPs (dividend reinvestment programs) with a minimal investment, and the securities are liquid. Rental properties, of course, not as liquid.

Southern Yankee, you might want to look into 529 programs to help fund your children’s college educations. Depending on your state, there may be additional tax benefits to investing.

*Note I said passive. Being a landlord is not passive. I am not a landlord. I am an owner of (the legal entity that owns) the properties. I hire a property manager to handle the active duties.

[Southern_Yankee]

@D_Odds

Southern Yankee, you might want to look into 529 programs to help fund your children’s college educations. Depending on your state, there may be additional tax benefits to investing.

Thanks, D_Odds, we do have college accounts set up for the kids already.

[Bill_Door]

@D_Odds

(snip)That said, I’ve since switched to passive income investments: DRIP stocks & rental real estate*. You can get involved in DRIPs (dividend reinvestment programs) with a minimal investment, and the securities are liquid. Rental properties, of course, not as liquid.(snip)[/SIZE]

There’s somethng to be said for REIT stocks (Real Estate Investment Trust) as an alternative to rental real estate. Much better liquidity, and tax laws compel 90% of the profits be distributed to the shareholders in order to avoid corporate taxes. It’s a lot easier to diversify too. You can have retail, health care, hotels, apartments and the like. Not a ton of growth, but good passive income producing properties.