Cash Club: How paying debt is like an increase

Sometimes (perhaps not often enough) we get some extra money – be it a salary increase, a promotion at work, side hustles paying off, for some lucky folks a chunky enough dividends from their various investments. What to do with this extra money?

Do I upgrade the quality of my life? Should I contribute extra toward my debt repayment? Do I save some more or start the side hustle I’ve wanted to get into? Maybe you’ve traded enough demo accounts and the money should go towards your first live trade. We all have different things we may want to do.

I was fortunate to have gotten some extra money this year. Sadly the petrol price increase and the ripple effect eroded some of the extra money, taking me back to the standard of living before the increase. However there was still something left – not much, but something.

I can contribute slightly more to my cash savings and my son’s TFSAs. You could be reading this after an increase or promotion but have a pile of debt. I would suggest before you even look at the quality of life or saving more, add more into debt repayment.

As much as knowing no debt collector is going to annoy you with arrangements will let you sleep better at night, paying off the debt gives you a permanent increase. All those instalments are now all yours. You can do with them as you please. Hopefully you don’t see another opportunity to take more debt with that extra money, but pay off the rest of the debt snowball style. This exercise can also start you off in the habit of saving and starting off where you are.

Sadly new money doesn’t necessarily mean new life.

Njabulo Nsibande is a Just One Lap user-turned-contributor and a founding member of an investment club. His “Cash Club” blog details his experiences balancing the financial obligations of a young parent with his investment aspirations.