What To Do With Extra Money?

A Twitter listener asks what to do with cash above an emergency fund if you're already fully funded on retirement. Dave says you should pay off your house with it.

QUESTION: A Twitter listener asks what to do with cash above an emergency fund if you're already fully funded on retirement. Dave says you should pay off your house with it.

ANSWER: Pay off your house. Fifteen percent of your income going into retirement, something toward college, and above that, pay off your house once you're debt-free except the house and have the emergency fund. If your home is paid for, too, then what we're going to do is just start saving and investing. What do you want to buy? I put roughly 30% or 40% of my stuff in mutual funds. Actually, I put more than that in mutual funds until it builds up, and then I go buy a piece of real estate with it. I'm about half in real estate and half in mutual funds at any given time. I love real estate, though. I pay cash for it—no debt.

When you're first starting to save, save up a big pile of money in a mutual fund and when you look up and you've got $200,000 or so in there, then you run over and buy a little rental house or something if that's how you want to do it.