Thursday, June 26, 2008

Payday update: Decisions to make

Today was payday in the Loonie household, and I've updated my progress bars and NCN Network chart to reflect my current debt reduction and savings progress. No big changes this month, as I'm largely treading water on my ongoing goals. However, there is a significance to today's paycheque that I need to consider.

Today marks the last time (at least for the foreseeable future) that Ms. Loonie and I will be on the same pay schedule.

When she starts her new job next month, Ms. Loonie will switch from our current routine getting of paid every two weeks, to a two-paydays-per-month system. There will be times in the future when our respective calendars will line up and we'll both be paid on the same day, but these will be few and far between.

It's easy to dismiss this as a negligible change, as this really only means that she will be paid slightly more on a less frequent basis. However, our mortgage and student loan payments are currently synchronised with our pay schedule, so that the payments come out of our accounts on the same day we get paid. This means that, two weeks from today, our payments will be due a few days before Ms. Loonie's paycheque goes into her account.

This serves as a huge reminder of the importance of having some liquid savings on hand. Between Ms. Loonie's student loan and her contribution to our housing/utilities expenses, she shells out about $850 every two weeks. That translates directly to a $850 shortfall in our income that we need to cover on July 10.

When I started this blog, we would have had little choice but to use my ULOC to cover this interruption of cash flow. Today, however, we have a few more options:
  • Ms. Loonie can "borrow" from her tax savings account to cover the shortfall. When she gets paid mid-July, she can then move the money back into savings.

  • I can "borrow" from the Emergency Fund, for the same short-term period.

  • I can postpone some of my Freedom Account contributions for a few days to cover the shortfall.
Ideally, we'll use the first option, and leave all of her pre-authorized transfers in place. However, any of the three options simply represent a temporary re-allocation of cash savings to fill a gap in our income.

Once she has a couple of paycheques under her belt, Ms. Loonie will have more than enough savings cushion accumulated to cover future mismatched pay periods, and this will cease to be an issue. In the interim, however, it feels good to know that we have a choice in how we'll address this issue.

Just goes to show the difference that even $1,000 in liquid savings can make: borrowing from yourself feels a lot better than borrowing from the bank.

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