3% cost of living increase

[amberbamber]

My husband is receiving a 3% cost of living increase on his salary, active on his next paycheck. Which equates to about $60 more in each paycheck-taxes.

He contributes 3% to his 401(k) which his company matches. Currently we are in major debt reduction. And have eliminated 2700.00 in 2 weeks through working extra jobs.

Should we take the 60 extra and put it in savings so that we don't see it or should we take that money and pour it on more debt reduction?

[anonymous_saver]

How much debt do you have, at what interest rates?

How much savings do you have, at what interest rates?

How much take home pay do you have each month, how much expenses?

These questions will help us determine what you should do with husband's pay increase. Since you said you are in major debt reduction, I'm sure we could help you figure out which debts to pay off first, and if you have a large emergency fund, I would set aside one months worth into a high interest online bank, otherwise I would just take the rest of it (if you have one) and pay off your highest interest debt.

I'll look forward to learning more about your situation.

[aida2003]

It depends.....
How much would you earn in your savings?
What rates do you pay on your debts? How much left?
Do you have an EF for 3-6 months expenses?

If you're fighting CC debts, my guess would be to attack them until you don't see them .

PS. And hey, it's nice to see another Charlottean on here

[Joan.of.the.Arch]

If you take it seriously that inflation really is 3% (or greater!) it seems to me that you need to add 3% to each of your areas of spending, unless you have leeway built into your budget anyway. Of course, if part of your budget is debt and savings, you can also add three percent to those areas. So for example if you are budgeting $90 for electricity, add in 0.03 x $90 = $2.70. If your savings for a car is $66, add in 0.03 X $66 = $1.98. If you are paying $300 on credit cards, you could consider only increasing the contribution there by 3%, too. ...However we already know that inflation in some areas is much higher than 3%, so you may well need to consider applying no increase (0%) to some spending categories, so that you can fund absolute needs in other categories, especially categories where you have already cut spending to the bone, yet inflation is ratcheting prices up, e.g., gasoline, food, possibly heating oil come this winter, etc.

[amberbamber]

Well, we decided to add 2% more on to my DH's 401 (K), keep knocking out the debt and living below our means as much as possible.

Thanks for your suggestions. When I get some more time, I will post our debt amounts with interest rates, etc.

Thanks!