How should I invest money from the sale of my car?

I have decided to sell my car and expect to receive about $7,000 for it. I am also about to purchase a condo this week and will close on it in November once it is built. I am for sure putting down about $18,000 (about 5%).

What is the wisest way to use the money I receive from purchasing my car? Should I use it to increase the size of my condo downpayment (and lower my monthly mortgage payment), put it in the bank account and draw interest, some combination of the two, or maybe do something else that I haven't considered?

My guess is that you are only putting down 5% and selling your car is that you have spent your savings to obtain the condo. Most homebuyers do that. I would take that money and put it in an interest bearing account to be used for emergency purposes, like if you find yourself unable to make a mortgage payment for one or two months. While a lower mortgage payment may ease your cash flow each month, we are talking about a $75-100. I know that over the course of 30 years, interest on $7,000 really adds up, but there are other ways to reduce the overall interest paid on a loan, such as making extra payments from time to time.

It is really hard to save money when you first move into a new house - so many unanticipated costs. You will be able to sleep easier at night knowing that you can lose your job and keep your dream house.

Of the options you list, I'd suggest reducing your monthly mortgage payments. The extra disposable income will help with everyday bills.

Calculate the monthly payments at the 5% down, then do the same adding in the $7000 to the 5% down. How much does this reduce your monthly payment? Now multiply that savings by 360 (the number of months in a 30 year mortgage). How does that look.

Traditionally you will earn little in a savings account. You can however, get a CD at the bank. You should not buy one for longer than 1 year due to a strange phenomenon in the long term interest rates at this time. You can renew it at that time.

Also think about opening an retirement account at Vanguard. They will be glad to talk to you for free.

RS