I wanted to solicit everyone's advice regarding our finances at the moment.

My husband and I are currently debt free except for our mortgages. I use the plural because we have a 2nd mortgage that we took out when we bought the house, since we only had 10% to put down. It is a "piggyback" mortgage of $15,000 at around 7.5%.

My dilemma relates to the fact that we potentially have two cars (both are old and high mileage) that will need to be replaced in the next few years. We have a car fund that is currently at around $5,000. Plus we are getting over $10,000 in tax refund/bonus money in a few weeks. Plus we have a small amount (100 share) of stocks that was given to my husband when his company went public a few years ago. It vacillates between $10,000 and $15,000.

I hate the piggyback and would love to get rid of it, and I was thinking that we could probably get a car loan that is less than 7.5% (both of our credit is excellent). We only plan to spend $10,000 on a replacement car.

So, my question is: should we pay off the piggyback and be prepared to take out a car loan if we need to? Or should we save the money to pay for a car in cash? Or should we pay off the piggyback AND buy the car in cash with the stocks?

I hate to take out a loan on what is essentially a depreciating asset like a car, but the numbers tell us that the piggyback is "worse" debt than a car loan.

If you were in our shoes, what would you do? Also, it is possible that we will buy a new (to us!) car before one conks out. I know that breaks the cardinal rule of frugality, but we have young children, and they are small cars and not very reliable.

One more thing: We have around $10,000 in an emergency fund.

Thanks in advance for your help!

Here's your situation as you've described it:



The solution seems clear to me. Cash in the company stock. Combine it with your "Car Fund" and pay off the piggyback mortgage immediately. Then when your tax refund and bonus money come in, buy the replacement vehicle. If either vehicle dies before then, use your emergency fund to buy the replacement vehicle, then replenish your emergency fund with the tax refund / bonus money. No new debt required at all, no need to (permanently) sacrifice the emergency fund.

Sounds like very clear, simple, and effective solution.

Nice job, kombat.

The stock market is looking good, so keep an eye on that company stock, and sell when it hits 15000 if you are able to do that. Then, you still have 5000 in your car fund and you can change that to a vacation fund!

You have done a lot of good savings, and your money piles look good. Keep up the good work, Janie.

Thanks everyone for your advice! My husband has wanted to cash in the stock for a while. I've been the hesitant one, since it fluctuates back and forth. I keep thinking that it will go up a lot and then we will regret selling, but really we already have a guaranteed return on of 7.5% by paying off the piggyback.

Thanks again!