27M Canadian seeking some financial advice on allocating my $20k. Here are my options:
Mortgage Payment: Consider a lump sum towards the mortgage with a 37-year term, 5-year variable 6% interest (prime -1.2), currently facing negative amortization from the original 30-year term.
Car Loan: Explore putting funds towards a $50k car loan with 7 years remaining (fixed 6% APR).
Stock Investments: Contemplate investing in S&P500, TSX60, QQQ, or blue-chip stocks for potential long-term growth. (Already have about $30k invested in stocks; a portion of my paycheck goes towards investments)
Home Renovation: Decide between finishing the basement for rental income or adding a room to increase the house's appraised value.
HISA for Property Investment: Consider placing the funds in a High-Interest Savings Account (HISA) with the intention of investing in a second property next year.
Open to New Ideas: Welcoming any additional suggestions! If more details are needed for context, feel free to ask.
(Note: I currently earn around $150k annually, comfortably manage monthly mortgage and car loan payments with high interest rates)
Looking forward to your thoughts to help me decide. Thanks in advance!
@keithdixonjr Here's what I would do: dump that 20k in the car right away. Even go a step further and take out everything from investments (except for RRSPs if you have anything in there) and pay the car off.
It makes no sense to keep paying 6% GUARANTEED interest in hopes of reaping arbitrary profits with potential for loss from your investmens. The math simply doesn't make sense. Even if you end up getting average returns of ~6% consistently over the next 7 years, you still net out to 0.
@real_magyar I agree that pay off debt that is not mortgage so any loans or outstanding credit cards get rid of them. This will free up your income that is really your wealth building tool.
Even sell the car and take the profit to buy a more cheaper car that is what you need. You’ll have extra money to pay off debt.
@keithdixonjr With negative amortization on the MTG and you’re already doing contributions to an investment account I’d throw it on the MTG so you don’t have the looming potential of a balloon payment.
@keithdixonjr Well, its depend on your taste. low risk = pay off any debt, the gain here is 6%. If you like high risk, invest in stock. 5 years history of sp500 alone yeld 18-20%ea year. Hisa = 4% ,blahh, forget it. Home renov = losing money.
@keithdixonjr It might be tempting but I don’t recommend 1, 2 or 5, especially 1 and 5. 3 is great but investing in Bitcoin and Ethereum would be ideal if you don’t have any in your portfolio.
Inflation is likely to be high for the next 5-10 years and the value of the debt you hold will decrease, so you will benefit just by holding the debt.
Investing in a business or adding a room for rental income is also a good option.
@keithdixonjr Where is the 20k coming from? If it’s a bonus or could be taxed, make it work twice as hard for you by putting it into your RRSP. You’ll reduce your taxable income and can put your entire tax return against your debt.
