The title alone to the article makes me mad!  It has been over 2 straight months of no additional stock or investment purchase and it is very puzzling but easy to understand why at the same time.  Each stock I analyze either has a just a tad high price to earnings ratio, or the debt I am considering to pay down just doesn’t make as much sense based on the pure numbers.  What’s a guy to do?  See why I am sitting on Idle Cash and it’s building under the cushion of my couch at this moment!  Plus – see potential ideas/moves for the idle cash I have.

the idle cash

So the predicament is this – It has been over 60 days and no investment nor debt pay down has occurred, to which I have built up capital, which I am now considering to be idle cash.  More background.  As I described – I do not like my car and do have have $6.3K in auto loan remaining (prior to April’s payment) & $75K in mortgage debt (cost of my house living, most recent).  However, I also have the lofty investing goals for this year.  Here are the 3 facets in consideration/thoughts:

1.) The debate, that I am in, is I do not have enough cash on the side to pay off the auto loan in full, which has been debating with my girlfriend, friends – such as Bert, and others within the investing/pay down debt community.  The idle cash position is close, but not quite there.  However, I know it’s paying off a loan on a depreciating asset, with the loan only at 2.29%.  However, gosh would it be nice to unlock almost $300 in extra cash each month : )

2.) Further, with my mortgage – I had stated earlier that I wasn’t going to have a goal of making any extra payments on the loan, due to rising interest rates (which – surprisingly, mortgage rates have actually decreased per the bankrate.com reports on 30 year mortgages) announced by the fed.  Plus, I do plan on turning this into a rental property at some point – extra payments on this is great and all, but would take some heavy lifting to rid this debt in the short-term, as I don’t have anywhere close to $75K, so as the Duke of Dollars had an article & made a valid point about paying this off.  Check out the Duke’s article here.

3.) Then, you have the stock market.  This year to date from the S&P 500 through the first quarter, shows appreciation of 5.53%.  Not many stocks that I own are giving me a “no-brainer ‘I have to purchase this stock'”, type of feelings.  The feelings are odd, at the moment.  It appears I am not sure how to pin-point it.  Also – introducing a new stock into the portfolio has been difficult.  I analyzed Cisco (CSCO) a few weeks ago, but did not pull a trigger on them, however – they would fit the bill, except for the “Oh Crap, they’ve had so much appreciation over the last 12 months, talking 21%…  Just – “WOW”.  So here we are; 60+ days of no stock purchase as it’s been very difficult.  Target (TGT) tanked by well over 15% due to forward outlook and their strategic re-vamp of their stores, which that will take time to see the results from these actions.  

Three Questions for use of the Idle cash

Question 1: Do you think I should be investing, by using my automatic investment strategy for example, and buy a stock if it simply fits the criteria?  As in – Cisco (CSCO) – if it fits the price to earnings, payout ratio, dividend growth and yield metrics – should I just flat out buy it?  Even if it has increased like a freight train?

Question 2: Do you think I should pick one of Vanguard’s ETFs, such as VYM (Vanguard High Yield Dividend ETF), with a low expense ratio and an approximate 2.90-3.00% yield?  Not to use the idle cash in one fell swoop, but potentially making a $700-$850 periodic investment once per month to dollar cost average and continue the investment push?

Question 3: Do I simply save the idle cash, let it build up for a month more and pay off the auto loan to open up more cash?  My auto payment is $284/month and my auto insurance is around $53/month based on the premium I had received via online for my new annual amount (not yet paid, as it begins at the end of this month).  With the payoff, I will for sure open up $284 + a decrease to my auto insurance due to no longer being financed, expected to be maybe another $5/month (not sure on how much that actually impacts the renewal).  Therefore, I could, on a rounded basis, see a $290/month of new cash flow for further investments if they arise.  Anyone’s thoughts on that? 

Conclusions/final thoughts

In the end – I had a goal of increasing my dividend income by 24% from the $8,067 that was my forward amount at 12/31.  I don’t want to force myself getting there if there aren’t solid opportunities.  However, there are different ways to keep that going via the ETF.  At the end of Q1 I was 20% towards the goal and not 25%, so only slightly behind, in actuality.  Further, I have to keep in mind how nice of a position it is that I am in.  Most individuals may find it hard to save a $1, let alone having more than that to use for debt pay down or investment purchases.

Therefore, this isn’t a huge debate, as each move listed above in the questions would not be a bad move.  I try to optimize to the extreme with each and every dollar, so no surprise that I’m going through this inner-battle.  However, I would LOVE to hear from the readers out there on what ya’ll think?!

I appreciate the kind words and insight everyone!  I am sure I am also not the only one in this debatable position and am very eager/anxious/excited to see what the community has to say.  Thank you again and looking forward to hearing everyone soon : )  Keep the push on towards financial freedom!

-Lanny