Friday, 22 May 2015

Debt or Savings?

Today is payday, that means that I enact my budget that I crafted last night. As expected I got my paycheque yesterday at the end of work. While I can’t deposit or spend any of it until after work today, it means that I was able to plan out what to do with it. 

All of this planning and budgeting left me with an interesting dilemma and a few choices that I am facing. This dilemma was brought about by a happy circumstance that my paycheque was larger than I had anticipated. So in fact I have a bit of extra money, and I must decide what to do with it.

For fun I will put the choices facing me, to you to let you mull over what should be done. I will let you know what I actually decided on Monday, when I blog again. Each of these choices has both good points and bad. They bring with them both advantages and disadvantages. There is no clear winner . . . thus the dilemma. 

Option 1

My first and most sensible option is to pay my planned (and first) $1000.00 on (the dreaded) Card #3, and keep its paydown on schedule. Then I will pay $500.00 on Card #1, this will take a large bite out of it but not pay it off, I will carry a balance of a few hundred dollars. There is a miniscule amount on Card #2 from one of my reoccurring payments, that will be paid off regardless. This plan keeps my Card #3 paydown on schedule but leaves me with a balance on two cards. This means more interest paid.

Option 2

Another way to go would be to pay off Card #1 entirely, pay off Card #2 and put $500.00 on Card #3. With a bit of economising I can make this work. This would leave me with a balance on only one card but set back my paydown schedule on Card #3.

Option 3

This option is a modification of Option 2. I would pay off Card #1, pay off Card #2 and ignore Card #3. Instead I would put that $500.00 into my savings account and actually start a contingency fund. The trouble with this option is that it would set back my paydown schedule on Card #3 (already delayed) back a month. In doing so I would pay even more in interest on Card #3. Yet in recent months it has become apparent that a contingency fund is a valid thing to have. 


I welcome your thoughts on this but at the very least I hope that it lets you see that there are many ways that you can manage debt. You can do many different things with your money so take a bit of time each payday and plan and explore a few different options before you actually spend your paycheque. A spreadsheet is a great tool to help you do this. If you don’t have one but would like one, contact me and I can send you mine.

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