I’ve never done this before, I took money out of savings to pay off debt. No, it’s not that I like debt, I certainly don’t. It’s just that I like my savings more and hate to part with them. Think of all the time and sacrifice it took to save up that money. Think of the possibilities, what if I suddenly need that money tomorrow and it’s gone? But this week I bit the bullet, took $5000 from savings and paid off the credit card.
A few months ago Mr. M and I finally combined our finances. But getting control of his income came at a price, $8500 in credit card debt. Paying off that debt was not one of my priorities, I’ve dealt with the debt demon before and didn’t feel like tangling with him again. But slowly my thinking changed as I started plotting our future course. That debt was weighing us down, getting in the way of our goals. A few weeks ago I decided to speed up the payoff, setting a deadline for the end of the year. Of course as soon as I make a plan I have to change it!
We have big dreams and plans, which are on hold until the debt is gone. Fortunately we also have savings, which mean financial flexibility. In this case I think it makes sense to pay off the debt out of savings. If it meant having nothing left afterward, then I would not do it. Savings are a lifesaver, without savings you will be right back in debt in a few months. The car will break down, the plumbing will spring a leak (yep, in our basement) and invariably something will go wrong. Since I can pay off the debt completely and still have over $10,000 in savings, I feel comfortable kissing that money goodbye.
Next month I can shift our budget to focus on our long term goals. It feels amazing to know that we are now actually working towards the future we dream of, not just dreaming of it. I’ve made a list of the financial milestones we must reach to retire, next month’s budget will put us firmly on the path to complete many of those goals. The rest will depend on our ability to earn more money and to better manage the money we have.
Step one to retiring early – pay off existing debts.
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5 comments:
That sounds like a smart thing to do - especially as you have savings set aside. The interest on the debt is probably more than what you were earning in savings, so you come out ahead that way too. I know what you mean though about hating to spend savings - it is hard to do! But it certainly sounds like you made a good choice.
Congratulations, I love it when debt gets paid off. I know the fear of "what if I need the cash?" but it's pretty nice to remove one thing hanging over your head.
CONGRATULATIONS!!!! That was a big thing to do on your part, combining the debts but it's also part of a much bigger picture of you and Mr. M together. I just want to say congratulations again. :)
Congratulations :)
@Dawn - the savings rates are pathetic right now, so it definitely made economic sense. But I hope I don't need that money, starting my company may happen after all and I'll have to survive on savings for awhile. Yikes.
@Revanche - oh I'm definitely scared! Suddenly my job doesn't feel so secure, but reducing expense should help me whatever happens in the future.
@Serendipity - I must say we feel more and more like partners now that we've combined finances and started discussing our future goals. Unfortunately he has no interest in PF! I updated the net worth spreadsheet last night and I said hey you want to take a look, his response - no! I have to blog to get my finance on.
@Laura - thanks!
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