My wife and I have a cat. This cat is just over a year old, but loves to play. My wife was letting the cat chase a stick with feathers and a bell on the end of it the other day, and brought the stick up close to my chair. At that same moment, I turned to ask her a question, and the cat was in mid-air within inches of my face! Through some miraculous act of flexibility, the cat seems to turn in mid-air and avoided hitting me in the face. She then ran out of the room like a scared rabbit, and calmly started cleaning herself in the the living room, as if nothing in the world had happened.
I was laughing so hard about it that I had trouble staying in the chair, but later got to thinking about it. The cat has the ability to overcome difficult situations due in no small part to her flexibility.
That’s how I’d like my finances to be – flexible, and able to turn in mid-air. Right now, my finances aren’t very flexible. I’ve got a set amount that goes out every month – set expenses that drive what we do, and very much limits our discretionary spending.
So if my goal is flexibility, then, how do I attain that? Obviously, having money provides flexibility, but, then, so does not having expenses. In the short-term, having money will provide flexibility, but longer term, not having expenses is what will provide the most flexibility (at least in my mind). Even if I have a hundred thousand dollars in the bank, if I’m spending $5,000/month, I’m only good for about a year and a half. If I’m only spending $2,500/month, I’m good for almost 3 and a half years. But the added benefit is that I get to a year and a half earning (and paying taxes on) half the money required in the $5,000 scenario.
With that said, my goal towards paying off debt is shifting slightly. Rather than focusing on the credit cards and emergency fund (worthy goals, to be sure), I am going to focus most of my discretionary debt reduction towards paying off the Ranger, because that relieves me of a $200/month payment, and reduces my monthly payment obligation by about 13% (including only debt service – mortgage, student loan, car, credit card, and truck). That’s a pretty good pay hike, especially these days.
I like fixed costs rather than flexible ones that can change from month to month. Loans, even though they're debt, usually have a fixed cost payment plan. Credit cards always change the payment from month to month. I do agree getting rid of monthly payment obligations is a great way to free up monthly cash flow. I didn't start with my credit cards but got rid of my vehicle loan in order to buy my house. Credit cards have to go next so I can tackle student loans. Pay off your car loan to get a 13% raise? Go for it.
ReplyDeletegood luck in your efforts to get financially flexible!
ReplyDelete