Found Money
Don’t we all just love found money? I love the money but hate the concequences — figuring out what to do with it. It has been many years since I’ve used the logic that found money is free money to spend. Instead, I agonize over the best use for the money and mourn the lost opportunity to spend it on totally frivioulus items.
The found money I’m talking about is the tax intercept for back child support that will show up next week to the tune of about $5,000.
Option One - Put all into savings: This is the one that I like the best. It feels safe to me and allows me to think that maybe we will be able to buy a house next year. I’m having a hard time thinking that we’re going to be able build our savings up fast enough without contributions like this.
Options Two - Put all toward debt: This seems like the most logical option and what most personal finaces advisors would say. However, does anyone else ever have a hard time throwing large chunks of money at debt? Yes, I want our debt to go away, but I don’t know how to shake the fear that we’ll have less debt but still no money and no house in a year.
Options Three - Put allinto the daughter’s savings: I could start investing in stocks for her, what a wonderful thing. However, that just isn’t going to happen at this time. When we’re no longer in debt, we’ll do this — but for now, it is going somewhere more useful. This option is really just my “ideal world” scenario.
Option Four - Split it up: This seems like it might be the best plan if I can get my mind to accept it. Say, put at least 50% toward debt and then 50% into savings. Or $800 for the daughter (summer camp) and split the remaining…
To make the best decision possible, I honestly need to evaluate our debt situation further and see what a difference this money will make. I must know: 1. how much will a $5,000 payment reduce our monthly payments? 2. If we take the difference between our current payments and the new reduced paymenrts and put it into savings, how long will it take to add up to $5,000. 3. Based on this information, what should our plan of action be?
I will keep everyone posted as I run the numbers some more.
Single Ma
October 13th, 2006 23:57
Option four sounds the best. I’d put $1,000 in savings to start a baby e-fund and throw the rest at debt (especially if this is CCs).
However, if the interest rate on the debt is less than 5%, I’d do the opposite and put most of it in a high yield savings account where you can earn more than the cost of your debt.
Budget Recap - October 2006 » The Weight of Money
November 3rd, 2006 10:40
[...] General Comments: Savings were intentionally unfunded. Due to early payments in September, only two credit cards were included in October spending – November will get an additional payment and, hopefully, some found money spending. Gas budget was originally set for $400 – commuting allowed me to have one tank of gas last for over a month. Eating out was under the original $200 budget but more than my $150 goal. [...]