Money falls out of the sky...what do you do with it. Generally in your job you will get a performance review, or an annual raise or what have you. I tend to get about a $100 per paycheque raise every year. I will list what my current goals are to do additionally with the money.
25%: Up my mortgage payments: My property taxes are connected with my mortgage and they go up each year (I think it was a $6.25 increase last year). I will put my mortgage up $25 every two weeks, accounting for the increase in taxes and a small increase in my payments. By doing this last year, my amortization dropped almost 18 months because of it!
25%: Increase savings: Last year I added a $25 per paycheque increase to my RRSPs and I will do it again this year. It will go into a Canadian Index fund, which generally has good returns and a low MER (management expense ratio). I will discuss my investment philosophy in future posts.
25%: Extra loan payments: This will be an additional $25 payment on one of my student loans. It has been a difficult decision on how to deal with this, as the saver in me wants to see my assets go up, but the mathematician in me realizes that if I decrease my loans, I will have more disposable income and more future savings. My brother has decided to drop his RRSPs to almost negligible and pay off his loans and his mortgage. I think I will slowly increase my loans and my savings. For me, it is nice to see some additions rather than just lowering my negatives.
25%: Disposable income: The frugal people will not be happy with this, but the reality of the situation is that expenses rise with inflation. Even if I don't spend this money, it can go to an emergency fund or a floating cash fund so when I need it, it is there. I will talk about how I manage (and limit) my disposable income in future posts.
So how do people feel about this? Should I be trying to pay off all of my debt first before I worry about upping my savings? Am I doing the right thing in balancing? Feel free to leave a comment with your opinion!
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