‘I don’t want to squander this opportunity’: I sold my business for $130,000. Should I pay off my mortgage with a 7.3% interest rate?

United States

Dear Quentin,

I’m in my early 40s, and I have worked myself into a sad state of health with the stress of running my own business for 15 years. In April, I pulled off the Band-Aid and sold my shares for about $ 130,000. Coincidentally, the remaining balance on my student loan was forgiven. 

I feel like I have a new lease on life, and I don’t want to squander this opportunity. I took a part-time job in a local coffee shop, and it is a no-brainer job that gives me some mental rest while covering at least my mortgage payments. I have $ 150,000 left on my mortgage with 7.3% interest. 

I am setting aside $ 20,000 of my windfall for taxes and using $ 15,000 as income over the next few months, and I’ve put the remainder of the first installment into a high-yield savings account. The second installment comes at the end of June, and the rest will be completed by the fall. 

It may not seem like a lot of money to most people, but this is the first time in my life I am not living paycheck to paycheck. My business partner and I always paid our employees well, but that meant not paying ourselves as owners. My first priority is restoring my health and overcoming the burnout.

‘My first priority is restoring my health’

My partner is a military vet and he is not able to earn a very high income. What he brings in basically covers his child support and a couple of smaller bills. The mortgage and living expenses are on me. We value investing in making our property more resilient and self-sufficient. 

Some people have suggested I invest my money — I have had no savings until now, and I have nothing saved for retirement — and/or buying property where we can be even more self-sufficient and eventually live off the grid. 

Some friends have also suggested that I just throw the money at my mortgage to get debt-free and dive back into the workforce, as I have a potentially high earning potential, especially if I take a high-stress job.

While I have applied to some corporate positions in keeping with my “earning potential,” honestly, my heart is not in it, and I think I need a few months to get over the intense burnout. If this money can help me get my health back, then that would be a good use of it.

However, I think it can also be leveraged to get me in a better financial position for my future. I would love to get some advice on ways to take advantage of this opportunity. I’m open to any and all ideas and suggestions; thanks for reading!

Wondering What to Do Next in Wyoming

Related: ‘I once felt that I had nothing’: I had an $ 8,000 debt that I was afraid to reveal to my boyfriend, but I turned my life around

“Our ability to navigate uncertainty is one sign that we are growing as human beings.”

MarketWatch illustration

Dear Wondering,

It’s not an either/or decision. You can throw some of this money at your mortgage — at least $ 50,000, if you can afford it — and also not jump right back into the workforce. With inflation running at 3.3% year over year in May and your mortgage rate at 7.3%, the sooner you pay off your mortgage, the better off you will be financially and emotionally. Reducing stress in your work is a good start. Reducing more stress in the cost of financing your home is an even better middle.

The return on CDs has more than doubled over the last couple of years, and rates are currently in the 5%-plus range, particularly for high-yield, online accounts. Some have no minimum deposit restrictions or else have minimums of a couple of thousand dollars, while others have $ 25,000 minimum deposits. Also consider putting aside money for an emergency fund, which should typically be six to 12 months of your expenses.

With interest rates so high, prices still elevated and the stock market continuing its unpredictable seesaw act, making money off your cash is an increasingly popular option for savers and investors alike. In addition to CDs, other zero- or close to zero-risk options include high-yield savings accounts, checking accounts and short-term Treasury debt. Money-market funds are also extremely low risk.

Consider shorter-duration bonds, mutual funds and exchange-traded funds, with a maturity of less than five years; Treasury inflation-protected securities (TIPS) — inflation-protected bonds issued by the Treasury; and that magic word — diversification. Morgan Stanley MS, +0.30%  cites opportunities in “value-oriented and defensive sectors.” My MarketWatch colleague Jeremy Owens discusses these issues in his “On Watch” podcast. 

Retirement savings is your biggest vulnerability right now. Financial advisers typically recommend saving between 10% and 15% of your earnings for your retirement nest egg. The Roth IRA contribution limit for 2024 is $ 7,000 per person — and anyone else under the age of 50 — with an additional $ 1,000 catch-up contribution for people who are 50 and older. If you are filing jointly with your spouse, your MAGI must be under $ 228,000 in 2023 and $ 240,000. (Read more here.)

And the next chapter? That is still unwritten, as the song goes. You are in your 40s and entering a period of uncertainty. That’s OK. Our ability to navigate uncertainty is one sign that we are growing as human beings — whether it’s taking the time we need between jobs to recharge our batteries, selling or buying a house in a high-interest-rate environment, or holding our ground when the stock market is behaving unpredictably.

More than 80% of employees are feeling at risk of burnout, according to a recent report by the consulting firm Mercer. Signs include sleeplessness, disengagement at work, apathy about your career, and negative feelings about your job. “Burnout isn’t a medical diagnosis,” the Mayo Clinic says. “Some experts think that other conditions, such as depression, are behind burnout. Burnout can raise the risk of depression.”

You are in the fortunate position that you a) know the cause of your burnout as both employee and employer and b) are in a financial position to take care of your physical and mental health, and plan a path forward where you have a life that is both financially and spiritually rewarding. Taking some of your windfall as an income while investing in a high-yield savings account (and paying off some of the mortgage) is all progress.

But listen to your body, because your mind will lie through its teeth. Rest. Sleep. Do things that you enjoy. Play tennis or pickleball or golf — whatever sparks your fancy. Read those books you’ve always wanted to read, or just listen to them on Audible during your daily walk. Re-evaluate your diet for improvements: Eating out less? Less red meat? More vegetables? Cut down on sugar and glasses of wine during dinner? This is the time for a reboot.

There’s more to life than work and money, if you have the luxury of putting the former into perspective and enough of the latter to take time out of the workforce. You paid your employees well, and now it’s time to give yourself the same dignity and respect. Stress negatively impacts our ability to make the right decisions, so I have full confidence that when you have taken a little time off and put some of your $ 130,000 to good use, your next chapter will reveal itself.

More columns from Quentin Fottrell:

‘My husband and I have 8 kids’: We have $ 200,000 in a high-yield savings account at 3.75%. Are we beating inflation?

‘He’s an egomaniac’: My husband said he’ll flush his $ 1.5 million IRA ‘down the toilet’ rather than split it with me in our divorce

‘He always managed to play golf’: My husband of 14 years never worked and now we’re divorcing. He wants half of my $ 1 million home.

Check out The Moneyist’s private Facebook group, where members help answer life’s thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.

By emailing your questions to The Moneyist or posting your dilemmas on The Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.

By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.