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# Options

September 9th, 2022 at 06:18 pm

I am a teacher and so don’t get raises the same way people in the private sector do. I don’t receive merit raises but do get step raises. This year I am not moving over a step, so was not expecting any kind of raise. However, California gave a hefty (but still below the rate of inflation) COLA raise to school districts of 6.56%. For the first time in my entire career, our school district is giving us the entire COLA plus a tiny bit extra. With the step I’m at, this should make for a take home difference of \$4000 for the year, or around \$335 per month – a decent increase after taxes!

The union also negotiated a one-time lump sum payment equal to 6.5% of my yearly salary. After taxes, I’m expecting to net right around \$4000. I have not yet decided how this is going to be spent. I would love to throw the entire balance towards credit card debt, but with some of the spending we had to do this summer, our savings account took a hit.

My comfort zone is at two months’ worth of bare bones expenses in our emergency fund. Currently, we only have one month of expenses. \$4000 would almost replenish our emergency fund. Plus as we won’t get the money for a several weeks up to a couple of months, that money coupled with what I would contribute to savings, would top off our emergency fund.

I could also split it up and send half to the emergency fund and half to debt. Clearly, I’m torn. I guess the bonus is that we are going to be getting the money and that I have options!

### 3 Responses to “Options”

1. Lots of ideas Says:
1662749471

What is the interest rate of your highest debt?
How many months are you from paying it off? Call that X
Calculate a year’s worth of interest by multiplying \$4000 by the interest rate.
Divide that by 12 to get the monthly interest. Call that Y.
Multiply X by Y.
That is roughly the amount you would save by paying off that debt.
(If your highest debt is less than \$4000, you need to extend the exercise to the next highest interest rate)

The question then is ‘is the peace of mind of having more money in your e fund worth the amount you would save by paying it off?’
And also, if you put it in the e fund, do you have the discipline to only touch it for true ‘emergencies’?
If the answer to that is ‘no’, then the best use is to pay off debt so the money doesn’t fritter away.

2. rob62521 Says:
1662937421

Wow, as a retired teacher, I'm so glad you are getting this! A friend of mine who worked in the private sector was absolutely shocked at how little I made with the amount of education I had as well as years put in and how small my pension is compared to his.

Lots of Ideas makes a good point on whether you would not touch the money in the e fund. Personally, I think I'd rather be debt free and then scrimp and save to fully fund the emergency fund since we don't know what is going to be happening.

3. terri77 Says:
1662982386

How much credit card debt do you have have?

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