In The Money Keeps Rolling In, I talked about the refunds I was expecting from selling my house. At that time, I expected to get somewhere around $500 back, between credits on my accounts with the gas and electric company, along with refunds from my mortgage escrow and homeowners insurance. I wasn’t 100% sure what to do with this money, so my thought was I would leave it in the bank until the end of this year.
As usual, I’ve changed my mind.
I’ll be honest, I change my mind fairly often about financial decisions. I’m a worrier by nature. Opportunity cost is a huge issue for me; If I spend the money on this, then I won’t have it for that. And, if I decide that I want this more than that, I’ll regret having spent the money. My thought was that if I sat on the money long enough, I’d have a clearer idea of what my biggest priority was.
Once the checks started rolling in, I realized my $500 estimate was going to be closer to $1,500. I way underestimated how much money would be in my mortgage escrow ($1,200!). My mind started racing to all the things I could spend $1,500 on: Furniture! Vacation! Clothes!
And so, I put the money into an extra payment on my car. Usually I’d wait until the end of the month, so I was only making one extra payment. But, obviously, that money was too much of a temptation sitting in my bank account. So I’ll be making 2 extra car payments this month. I’ve become obsessed with running the numbers on how long it will take to pay off my car loan. That $1,500 makes a huge difference on a $16,500 loan! I knew if I left that money in the bank, I’d be constantly finding “needs”, and eventually it would be gone, with nothing much to show for it. I wanted more “bang for my buck”, so to speak.
I have a $5,000 emergency fund. I’m fully insured, with awesome medical insurance. If something tragic were to happen, I have $270 “extra” per week that I could divert. If I lost my job? Well, the emergency fund would help me weather the storm while I looked for another job. With my current cost of living, that’s over 3 months worth of expenses and spending. I could stretch it even further by cutting expenses.
Every time I run the numbers, I realize how much more quickly I can pay off the car loan, if I just stick to the plan. And once I don’t have a car loan? Well, then I’ll be debt free, with pretty low living expenses. That opens up a whole world of possibilities in my life. I’ll have choices that I never even imagined possible. And right now, that freedom is worth more than a vacation, or new furniture, or new clothes.
And so, my car loan is $1,500 less. And I’m one step closer to being debt free!
– Cindy W.