Try as we may, we don’t always make the best decisions. We may improve our odds by creating rules and other criteria to evaluate our options but even in the best of times these rules may develop bends in the direction of our wants.
Sure, every rule has its exception, but likewise, the justification slope is a slippery beast.
So with that backdrop, allow me to share a recent financial decision for your consideration. Did I rationalize a poor decision or have I appropriately realigned my priorities?
Here are the situational highlights followed by our selection options:
- In January I accepted a buyout from a former employer
- On June 1 I accepted a new job virtually replacing my previous income to the dollar
- Prior to the buyout we were roughly 3 months – on our then snowball schedule – from being debt free (non-mortgage)
- My wife drove a legitimate Get-out-of-debt-car that was quickly deteriorating – a second oil leak and a new transmission leak had developed since my previous entry on the topic
- I had travelled with my job, so my 12 year old Jeep Wrangler – with no AC – was simply a fun weekend rider
- My new job is local with a daily 50 mile round trip traffic-laden commute
- $10k from our buyout funded our 2008 Roth IRA contributions, this money was moved into an IRA account but not moved into the market and its entire amount is available – I consider it a dual purposed Emergency Fund at this time
- During my non-employment period, in a cash preservation mode, we added roughly 1 month’s worth of snowball payments to our debt load
At the time of my re-employment we generally defined our options as the following…
Option 1 – the Dave Ramsey friendly option
- Pay off all non mortgage debt
- Fund a non IRA dependent 3 month Emergency Fund
- Begin saving for a commuter car, Debt-Car replacement, and Emergency Fund growth from 3 to 6 months
Option 2 – the Slightly Rationalized option
- Purchase a commuter car and replace the Debt-Car for roughly $16k – 2 “new to us” used cars
- Fund a non-IRA dependent 2 month Emergency Fund (roughly 6 months with the Roth IRA dollars)
- Begin the 4 month process of eliminating all non-mortgage debt
So clearly with this set up, we selected Option 2. We did this with the mindset that the only significant difference is 4 months of decreasing debt risk (decreasing as we make our monthly snowball payments) offset by the reduced car risk… not to mention the increased creature comforts associated with the new cars.
So what do you think? Clearly we were intentional and budget conscious in our decision but did we make the right decision? Should we have endured the car situation through the summer while enjoying the (non-mortgage) debt freedom for 4 months or were we, in your opinion, justified in the pausing of our snowball for the sake of a couple cars?
Photo By: Outdoor Sports
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