Previously on Practically Humans, Jenny and I have discussed what we do with any savings we have at the end of each month. We put 25% into our emergency fund in a high-yield interest savings account, another 25% on the mortgage principal, and split the remaining 50% into each of our ROTH IRAs or two different brokerage accounts we have–one for future home repair payments and another for medical bills. We consider those our sinking funds investments.

We can’t fulfill this strategy any longer because we’ve been fortunate enough to hit a number in our emergency fund that we feel more than comfortable with. What should we do now?

What you can do when your emergency fund is fully funded

It’s late in the year now and while we can certainly continue down a similar path and change our plan slightly, we’re actually going to hold off on investing a whole lot. We fully funded our ROTH IRAs for the year. With our emergency fund also where we want it, that would leave us with only the mortgage to attack.

The thing about paying off your mortgage is that it’s money you can never get back. We’d love to eliminate it completely from our lives. However, there is too much unknown ahead. The mortgage company doesn’t care if you’ve paid off 10 years in advance. When you start missing payments, they move in for foreclosure. The mortgage company will never kindly give you any money back for early payments. They might offer a home equity line. A deal with Satan himself can be a wiser choice than that.

We are still investing during the ongoing recession or whatever it’s labeling itself these days. Because there are only two months left in the year and we expect some changes in 2023 for our income, we’re going to park some future ROTH IRA money in our high-yield savings accounting temporarily.

We’ve noticed interest rates have shot up drastically in the last few months. The account we’ve had since early 2020 has actually gone from about 1.2% when we first opened down to around 0.4% and is now at 2.4% the last time we checked.

While bank interest rates will never compare to the interest you can earn investing in the stock market, we would prefer to wait until the new year and put a huge chunk of money into our 2023 ROTH IRAs. Unfortunately, we can’t do that until the new year. You can always backdate your investments in your ROTH IRA until tax day. You can’t get a headstart.

Our emergency fund is going to be bigger than needed for a couple of weeks which is fine because we’ll get a little more interest on it before we resume with our ROTH IRAs. We may decide to put a little more into our sinking fund brokerage accounts but it won’t be much. Those aren’t our financial priority.

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The book that convinced us to start investing and being more proactive with our money and lives: The Only Investment Guide You’ll Ever Need by Andrew Tobias

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