Friday, June 01, 2007

Coping with Setbacks

Fortunately, there was a little bit of extra income in my household this past month. This was largely because of the way paychecks fell etc but now here I am trying to figure out whether or not it makes sense to pull the trigger on a major lump sum payment on a credit card (this was transferred debt from a student loan). But now, here I am, stuck because some money has been eaten up (quite literally) in a hurry.

1. Dinners out
2. Unexpected medical expenses
3. Landscaping
4. Birthdays
5. Water bills

Of course, some of this stuff was planned for and some of this stuff was actually handled via the normal buffer that is built into the budget. However, where I was quite eager to put a huge chunk down against some of this debt, these expenses, which total over 500 dollars make me somewhat more hesitant.

If I decide to pull the trigger anyway, it is probably not that big of a deal. But I will end up using some of the savings to do this deal -- effectively loaning myself the money. And if I choose to go that way, I think that I will probably pay myself some interest as well. So it is a tough decision. In order to get a better feel for what to do, I've decided to wait on it either way until about the tenth of June. By then I should have a better feel for what is going to happen.

Of course, liquidating savings reduces the safety net, but then again, removing a significant 200 dollar expense each month by paying it off will also make things easier; more wiggle room each month. And this makes me quite interested in doing it.

1 comment:

Kevin said...

Sounds to me like you may get paid bi-weekly -- true?

My wife and I get paid that way, and for years it was an ongoing financial challenge. Sometimes the mortgage payment right after payday, but other times it was the day BEFORE.

We finally set up a spending plan that pretends we get paid twice a month rather than once every two weeks. That drops 2 paydays a year out of the budget. In doing so, we ended up with a buffer after the first "3 paycheck month". Now that a buffer exists our account never scrapes bottom and future "ignored" paychecks go to our travel budget.

Just be careful with the lump payment if you don't have a buffer since that "when payday falls" issue can really bite you if you don't find your own way to maintain a margin of safety in your account balances.