Hello everyone! Today, I went on a run outside and had a nice deep thought about what to do with an unlocked source of cash flow. No, no this isn’t coming from my INCREASE in housing expenses or a pay raise. This actually goes back to relate to paying off my auto loan earlier, rather than later. This won’t be moving mountains, by any means, however this unlocks a new cash flow for me and now the debate is what to use the additional capital that will be available on a monthly basis going forward!
Unlocked Cash Flow
Even though I’m having an increase in housing costs, as I had written a little bit ago, I still will be in a net positive once the auto loan is paid off in full within the next few months (currently less than $4K, and I have a maximum 4 months left to pay it off OR sooner!). My auto loan currently is $284 per month, to which that will be the amount of my new cash flow going forward. If paid off by September, that will be an additional $852 for the last 3 months and will unlock $3,408 of cash flow in one year. Would you tend to agree with me, that this is quite a bit of new cash flow that will be coming in every month? I’m excited for finding the maximum usage of this out of the opportunities that are out there, to say the least.
The new future unlocked cash flow has allowed the potential for a significant purchase of $3,000 or more (that linked article was about the benefits of doing so) or then could even lead me down the path of investing or paying down the mortgage, the endless question/debate. With a few of these questions, and the long run ensuing – I felt it was time to get thoughts on paper and to then receive back from the community! Everyone okay with that? Perfect, haha… like you had a choice (kidding, of course).
Cash flow uses
$284 per month… almost as if “lions, tigers & bears, oh my” is ringing through my head on this run. The options and what can be used for it are interesting. Interesting thoughts such as…
1.) Save that for a year & go on a European excursion for two weeks, at least. Sipping cappuccinos, sleeping in hostels and visiting place after place. That is always an option, right? More than likely not the use of the new cash flow, but it’s worth a thought, right? Unless someone wants to comment below about it… haha
2.) The Mortgage – With an extra $284 coming in per month – should I allocate all or some of that to the mortgage on a monthly basis? Should I start knocking that down, reducing the # of months/years left. My rate is only 4.375%; and rates are rising – does it make sense to allocate portions of this to the mortgage at all? I believe these questions ultimately depend on how the stock market and other investment opportunities are showing out there.
3.) Invest into the Stock Market – Should I take that extra $284 to do what a dividend diplomat does best and buy dividend paying stocks? I could add that to a purchase I’d make, but the market is still riding fairly how, ALTHOUGH – a few opportunities have started to pop their head up in Realty Income (O), Johnson & Johnson (JNJ) Archer-Daniels (ADM) and Grainger (GWW). So many long-term dividend paying companies are coming back with gravity and I could stock pile the capital and use it for that. Another idea popped in my head as I was churning the corner to finish the run – I could save, at a minimum $1,000 and invest into a dividend income ETF; and just use the new capital for that. Thoughts??
4.) Real Estate – I could always save more cash on my own and then add this new source of cash flow to add to the capital for a rental real estate investment property. The homes in my area have experience low to moderate real estate price increases since the crisis, and it is a strong market for rentals, as I am near two universities and two major hospitals in the Cleveland-area. This new cash flow can be used to save for the down payment, to add a source of cash flow to the overall portfolio.
FInal Thoughts
At the moment I am leaning towards option #3, will think about #4, and if the market isn’t doing much out there, will come to a conclusion on #2 if it makes sense to. I know how lucky I am to be able to have an additional $284 per month going forward and I know I need to do what’s right to achieve the goals I set in 2017. It will be nice be done for good for an auto payment, and it will never be a plan for me to ever have one again, pending any emergent situation.
The whole goal here, of course, is to get a few inches closer to financial freedom. I have caught myself saying the phrase, “I’m sick and tired of being sick and tired” and that has to change. I want the freedom so bad, that I feel like I can taste just an ounce of what it would be like. If this helps me get there, then perfect, I know I am doing something more positive than not.
What do you think of these options and the overall goal here? What would you do with your “now paid off” auto loan? One idea that I left off the table was to create an account specifically for that savings, and then to use that for a newer car much later on/down the road. In my eyes – my damn Honda Accord is going to last a very, very long time or I messed up haha. But I understand if that’s an idea that one may have. In all, very curious to see what you would do and why! Appreciate the insight and guidance, talk soon freedom hunters, dividend investors and the like!
-Lanny