My company pays out its annual bonuses during the first pay period in March each year. This year the month of March is also a “3 pay month”. Since we get paid every two weeks instead of bi-monthly that means twice a year we get 3 paychecks a month. Personally, I like bi-monthly paychecks more as I value the consistency of a steady stream of income versus the extra cash twice a year. What I would like to do is get to a place where we live off for two paychecks a month and save the extra money from our three pay months or use it for a travel. But we aren’t quite there yet.
Either way, the point is that the month of March is giving us an influx of cash that we don’t normally have. While I would like to take that money and toss it in a Roth IRA or use a chunk of it to save for travel, we really need to clear out some of our debts. We owe on taxes this year, have two car loans, and have my student loan. So what we have decided to do is pay off one of our cars (about $4000 worth), pay our taxes (about $1750) and pay off a chunk of our other car (about $6000). All in all this lowers our actual debt by about $10,000. But more importantly (for us) it frees up cash flow. The car we paid off was costing us about $310 per month so that’s now money we have available monthly. With our house, student loan, and daycare we were in need of some cash flow relief as our fixed costs are really high right now.
I am waiting until the end of the month to see what our savings looks like before making a decision to fully pay off car 2. Right now there is about $2000 left on the loan. We could afford it, but I just want to see where our emergency fund is at the end of the month before dipping into it to fully pay off the car. We are having some other issues with major appliances that may need to be replaced soon (AC, hot water heater, and possibly dish washer) so I don’t want to be cash strapped if we suddenly need to replace one of those.
So it’s been an expensive month, but a good one. We’ve increased our monthly cash flow by $310 and eliminated $10,000 in debt and we may fully pay off our second car by month end. I’ll take it! Most importantly, it’s one step closer to being debt free!