Thursday, February 12, 2009

How I'm Planning for an Unstable Economy

At first, going away this year seemed insurmountable. Student debt upon graduation was an ugly number and the interest payments alone... depressing! Now I'm looking at a departure date in three and a half months. I have three sources of cash between now and then:

(1) a tax return
(2) a matched pension plan (cashing out)
(3) my salary

I need to make sure I have a financial cushion for when I get home. I'm planning on being under contract to work, but the world the way it is I don't want to take unnecessary risks and I need to be able to write a damage deposit cheque for when I get back. This will come from the pension plan. My tax return covers the budget for the trip plus a couple thousand dollars extra for emergencies. I'm going to apply as much of my salary to my student loan as possible in the interim to drive down the interest payments which will be in effect while I'm away.

I know that clearing out my pension is controversial, in the PF world. But, my return on investment for doing so immediately is: the savings in student loan interest, the freedom to take any job that pays my living expenses, and freedom from the tyranny of the bank who tends to operate in shady ways to do whatever it can to take that extra $20 from me each month. I could stay home and clear the debt off a few months faster, but to be honest being able to take time off in my industry can have a high opportunity cost so it's better to do it now than hope I might be able to do it later... I think?

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