I am a college professor and recently received my first check for book royalties for a textbook that I wrote. It's around $11,000 after taxes. I'm not sure what to do with the extra money. Does anyone have any advice?

1. Put into emergency savings (ING Direct)
2. Invest
3. Pay down student loans

I'm 38, married with two kids (ages 8 and 6). Both of our cars are paid off. The only debt we have are my student loans ($33k fixed 3.5% rate and interest is 100% tax deductible). Right now, I'm thinking about putting the money in savings. I use ING Direct for my emergency savings. Right now, I have about $22,000 in emergency savings so this would help bump that up a little. I could also invest or help by paying down student loans.

I don't think I'd be in a hurry to pay back a loan with tax deductible interest at only 3.5%.

That said, if this $11,000 royalty is just the first of several over the next few years I might just put it in a separate account with plans to use it to pay off the loan once you have enough. That's probably not the optimal financial decision but it would just feel kind of elegant to me to pay off my loan with book royalties.

But, being somewhat familiar with what is going on with textbooks right now I could understand that this might be almost a one-shot payment with only one or two smaller ones to be expected over the next couple of years. In that case, so much for simple elegance...I'd just put it in savings.

Good luck and congratulations for being one of the few these days that makes any money from writing a text book...aside from the publishers that is.

Congratulations in having your first paycheck. If it were me, I'll probably spend half of that in paying my loan and half would be on savings or investments. But it's your decision so trust your instincts and go with it

Thanks for the responses. I will receive royalty checks twice a year in the future but the income is uncertain. I have been paying down my student loans under an extended 30 year plan so there is no real. My student loans from law school are only 5% of my monthly income and I have been paying them for 10 years so paying them off really wouldn't give me that much piece of mind. I'm glad I decided to go to a cheap state school for law school. For now, I'm putting the money in savings. Ideally, I would like to have 12 months of income in emergency savings. I talked things over with my wife and she also would like access to savings if something happended. Right now, I make $90k per year as a professor plus book royalties and other consuting income. This year, my gross income should be around $116k.

another question to ask is, will student loan interest continue to be deductible with the royalty checks? There are income limits on that deduction. I'm not asking you to spill your life story, but just check up on that.

also, have you already started writing the 2nd edition so that evil book store doesn't "steal" all your profits through used book sales?