I am still missing 1 T4 but I did have my last paystub of the year so I went into TurboTax and ran the numbers. It looks like I am getting about $1200 back. Compared to the $300 I got back last year, that's a big leap. Because I worked 2 different jobs last year and the second job paid lower than the first, the first job took more in taxes (based on that salary) plus I made regular RRSP contributions.
The problem is, I'm not sure what's best to do with this money. Now that I am going to be paid at a pretty decent rate I know that I can maintain my goal of $1000/month to debt repayment and $500/month to savings.
These are the possibilities:
1) put all on citifinancial loan (29.9% balance $8100)
2) put all on mastercard (11.4% balance $8900)
3) put all on visa (10.5% balance $980)
4) put all in emergency savings (current balance $350)
5) split it amongst debt repayment and savings
I'm thinking about 3 and 5 the most. I know that the citinfinancial loan is the loan with the highest interest rate and of course I should be paying this one off as top priority. BUT I am planning on paying $800/month starting in March which will have this loan paid off mid-2012, and according to snowball calculator, all debt to paid off by December 2012 which would be great. Also, since the interest rate of that loan is so high, interest will pretty well eat up all of that extra payment. So, I don't think this is the best use of the money.
#3 If I put all (actually $1000 since that's the Visa limit) on my Visa that would pay this off. Now, anyone who has followed my blog from the beginning would know that this would be the 4th time that I pay off that balance with the promise that I would only use it in emergencies and NEVER let it get back that high. So, if I do go with this option, I will close the card. Not just chop it up (I've done this and then re-ordered it) or leave it at home (use at home or know the numbers off by heart) I will close it. Cross my heart, I promise I will close it. The extra to go into my emergency savings.
Or 5 I could put say $700 on the Visa and $500 in the emergency fund. This would put the Visa at a more comfortable level (with the goal to pay it off and CLOSE it asap) and have my emergency fund at a level where if an emergency happened I could pay for it out of that instead of using credit. I've been good with this at least, I haven't used my emergency fund for friviolous purchases. So far I am leaning more towards this idea since its more of a balanced approach but I am tempted as well to just slap it down on the Visa and close it. This would also allow me to add approximately $200 to my emergency fund as well.
So, I would love imput on this. If you were in my situation what would you do?
Have a great weekend everyone! TTFN, Morgaine.
I personally would put $1000 towards the Citifinancial loan, and $200 into your Emergency Fund.
ReplyDeleteHonestly, I know you like the feeling of paying off items, but you're seriously penalizing yourself by not diverting as much payoff cash as you can towards the citifinancial loan since the interest rate on that puppy is substantially more than the rates on any other loan you've got right now (or the return you're making on any of your investments, for that matter).
ReplyDeleteIf you put the entire amount on the Citifinancial loan you'd save $30 in interest in the first month alone. Seriosly.... get rid of that thing ASAP.
While I agree on principal, I find it very hard emotionally to put $1000 on a loan and only $370 of the payment will actually go to paying off the debt (just did a mock payment on the online system). Yes $630 of the $1000 payment will be going to interest - ouch! But I may be convinced otherwise. I will bring it up at the meeting as well.
ReplyDeleteOh, and I was wrong about the balance of the loan - it is $8400 not $8100 as above.
ReplyDelete