Yay! A Reader’s Request! (This one was sent directly to firstname.lastname@example.org, but if you submit a particularly complicated Q&A Thursday, it will be it’s own post, promise.)
Here’s what I got:
I recently got a big chunk of money from my grandfather as a gift ($500). I was wondering what the best thing to do with it would be. Should I pay off part of my credit card or put it towards savings?
Thanks for your help. Love your blog.
This is such a great question. Rarely do we get this sort of additions to our bank account so we don’t really know what to do with them when they happen. Usually the first instinct is to treat ourselves to some new clothes or a nice meal out. When my clients come to me with this sort of quandary I have them take a minute and honestly think about what concerns them the most. Are they being kept up at night over their high credit card balances? Are they nervous that they aren’t contributing enough to their emergency fund? Or are they on track and in need of some pampering. After a few breaths, most people choose to pay off some debt or contribute to the emergency fund. If you are even a little in touch with your finances and yourself you will know what to do to avoid feeling guilty over making a wrong choice.
I have also told clients to consider splitting it between two such causes and maybe reserve $30 or so for a meal out or a new item they were eyeing. This seems to satisfy every need and gives you a little treat. I’m a fan of letting money that is a gift be used for something slightly more unnecessary. This preserves the intention of the gift (to treat you) while also allowing you to ease your mind a little over financial concerns.
If you got $500 out of the blue, what would you do with it? I’d use it pay down some credit card debt and treat myself to some froyo.