jIM_Ohio

Pay off the cars if you itemize your taxes. Two reasons

1) the mortgage interest is tax deductable
2) you will need to buy new cars before you need to buy a new house

More on #2- once the cars ARE paid off, you should set aside around $500/month for a new car. Put this money in a cash account.

You could then apply anything beyond the $500 to debt or other investments.

Generally speaking, a new car costs around $500/month over life of car.

For example if you have a car for 10 years, I am suggesting the car will cost you $60,000. $20,000 of this is the purchase price, the remaining amount is for repairs. If you have less than $40,000 in repairs and maintainance good for you. Consider that car maintainance is probably $1000/year (oil changes, tire rotations), that is $10,000, so half the 60k is accounted for. If you have the other 30k budgeted for, you can keep deductables on insurance low and bank money if you have less than normal car repairs. Because you have two car payments, you need to budget high until you pay cash for a car- once you pay cash for one, you will probably see cash flow improve and could downgrade budget to $400 or $350 per month for cars.

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