I hit a big milestone recently. I paid off my car! I even got the title in the mail to prove it.
It has been a while since I drove a car that was paid off. It’s a great feeling, and I am not at all tempted to go get another. This is what I’ve been working toward. To me, the advantage of buying a car vs. leasing is that you can have some years with no car payment.
So here I am, about $350 richer per month. What do I do with that? I could just live a little larger each month…buy some clothes, have some expensive meals out, etc. But that makes no sense. It won’t help me reach financial independence. Another option is to use it to pay down my other debt (personal loan, 401K loan). This is something that I seriously considered. The Debt Snowball Method is something Dave Ramsey and others promote.
Under usual circumstances, that’s the direction I’d take. But these hard not normal times (at least for me). I’m feeling more vulnerable at work, and I feel like I need to start stockpiling money. I don’t really have much of an emergency fund (definitely not 6-12 months’ worth). I have three savings accounts (basic savings, real estate, and kids), and I contribute some to these monthly. The first two accounts act as an emergency fund of sorts as I go to them when something unexpected hits that I can’t absorb from checking.
My go-forward plan is to add another $125 to the savings and real estate accounts, and another $100 to the kids accounts. Over the course of a year, that’s an extra $3,000 in my savings, and another $1,200 put aside for the kids. In another two-three years, my children will be graduated, and I plan to put a much smaller amount aside for them each month, and I’ll be able to use much of the $10,000 I had been spending on them to help me reach financial independence.
How do you eat an elephant? One bite at a time. And paying off my car is an important bite.