I am again struggling with the temptation to pay off debt in order to have short-term financial stability. It could, however, threaten our long-stability.
With our emergency budget in effect, we are within $180 of making ends meet based on Mr. Stapler’s income and my unemployment check. I recently estimated our taxes and discovered that we have enough in the bank that could pay off a loan. That would wipe out an extra $95 of monthly expenses, bringing us within $85 of making ends meet each month. It would also wipe out our un-allocated savings, which means that our Roth IRAs are our emergency cushion if we can’t rustle up the money to meet expenses.
Spending: We haven’t been spending our entire budget on certain line items, but we did have an expensive car repair (in the neighborhood of $1,000. Ouch!), and I will sheepishly admit to spending more than our $10 gift limit already. The annual Toys R Us board game sale was just too good not to pass up, so now I have a full gift closet but 42 fewer dollars. We absorbed the car repair cost, but it does make me keenly aware that an unanticipated expense could crop up any time.
Earning: On the plus side, I picked up some freelance work with a local attorney, and he promises that he could give me more work, although he can’t hire me full time. I also earned about $100 with my some of the affiliate links I have posted. Thank you, dear readers! However, my unemployment runs out in March, so we will be about $2085/month away from making ends meet once that expires. I would love to think that someone is going to hire me between now and then, but given the job outlook for my field, I find that highly unlikely. Mr. Stapler and I are working on starting up an online business, but I don’t know whether we will have paying customers by March — although, it is a possibility.
Motivation: The last factor I’m considering is whether living so much closer to the edge of our fiscal cliff (read: dipping into our Roth IRAs in a true emergency) would make me work harder to find paying work or to get more customers for our start-up. The reason why I think this might be the case is because of an experience last year. Mr. Stapler submitted a proposal for a well-paying freelance gig right around the same time as I was going through salary negotiations. After emerging from a stressful meeting where they lowballed me and I somehow got the guts to counter with a salary $15,000 higher, I called Mr. Stapler and debriefed him. The following conversation ensued:
R: “Well, that was my afternoon. How was your day?”
Mr.: “I got the XYZ job.”
R: “Yay! Awesome! Congratulations!
R: “Wait . . . when did you find out?”
Mr.: “This morning.”
R: “Why didn’t you tell me sooner?”
Mr.: “I wanted you to be hungry when you went into your meeting.”
That’s how well Mr. Stapler knows me, and I love him for it. That, and the fact that his freelance job did most of the heavy lifting in paying off our first loan. Although, it helped that I was hungry enough to ask for a higher salary.
So … do I dump the $12k into a loan to wipe out a monthly payment? Or would emptying that out of our cash stash be a mistake?