Using a windfall to pay off debt

When I went to do my weekly banking this week, I got a great surprise – an extra $260 from my previous job had been deposited into my account unexpectedly.  I’m not entirely sure why I got paid, but I suspect it’s retroactive pay due to a salary increase that had been in negotiation while I was an employee at the university.  Woohoo!

Photo Credit: Images_of_money via Flickr

Photo Credit: Images_of_money via Flickr

Any time you get an unexpected windfall, whether it’s from a contest, an inheritance or a tax refund, it’s a great opportunity to knock off some debts!  For me, I am taking $180 to pay back my chequing buffer.  I had “lent” some family members $300 a while back and had been paying it back slowly.  With this extra money, I was able to completely knock that column out of my budget and not have to worry about it any more.

Of course, the most financially sound option would be to throw the money towards your highest interest debt.  For me, that would be my student loans, currently sitting at prime + 3% interest.  I get charged $4.01 in interest per day.  Ugh!  But I am a debt snowball kind of person.  I like the personal satisfaction and piece of mind that you get when you don’t have to think about a debt any more at all.  But don’t worry – all my extra income is getting shoved onto my student loans.

With the remaining $100 or so, I took out that money as pocket cash.  It’s a splurge to be sure.  With Lunar New Year and Valentine’s Day coming up, I figure I could use the extra cash.

Have you been on the receiving end of a financial windfall recently?  How did you allocate your money?

Posted in: Credit and Debt

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