Small raise, what to do?

[Baby_nurse]

I just found out that I'm getting a teeny, tiny raise. I mean microscopic, will barely make a dent in my paycheck type raise. It's kind of a bummer because I truly worked my butt off this past year and received the top score possible in every area of my evaluation. But hey, it's better than nothing and I'm just glad to be getting something because I've heard other hospitals in my area are giving nothing and even contemplating lay offs because of their fears about the effects of the new healthcare laws going in to effect.

So my question is what to do with this raise. Do I put it towards my debt? Do I put it in my 403(b) ? Do I put it towards my emergency fund?

There are pros and cons to each scenario. The debt one is obvious, but the amount I will be adding will only save me about $50.00 in interest over the course of my repayment plan.

If I put it towards my 403(b), it won't make a difference in my employer matching, because I've already reached the max for that.

Putting it towards my EF won't do much, but since I such a worry wart, it might give me a little piece of mind.

So, if you were me, what would you do?

[Bob B.]

Do I put it towards my debt? Do I put it in my 403(b) ? Do I put it towards my emergency fund?

There are pros and cons to each scenario. The debt one is obvious, but the amount I will be adding will only save me about $50.00 in interest over the course of my repayment plan.

If I put it towards my 403(b), it won't make a difference in my employer matching, because I've already reached the max for that.

Putting it towards my EF won't do much, but since I such a worry wart, it might give me a little piece of mind.

Depends. My gut reaction would be to put it toward debt. How much debt? What do you owe against? What is/are the interest rate(s)?

Are you putting 15% of your pay into 403 (b) already?

How big is your emergency fund?

You really need to answer these questions first.

If your only debt is a mortgage - probably don't send the raise to debt.

If your only debt is mortgage and car payment and your car is financed for 36 months or less and your monthly payment is 10% or less of take home pay probably don't send the raise to debt.

If you have a number of high interest rate credit cards - then yes, send it to debt.

If you're only putting 5% of your gross income into your 403 (b), and you don't have a debt problem, then probably send your raise to the 403 (b).

If you don't have a debt problem, and you are already putting 15% of your gross pay into your 403 (b), then probably send it to your EF.

Please give more information.

[kork13]

Bob was pretty comprehensive, so I'm just going to agree with him -- you can't go wrong following his advice.

If it were me, I'd probably send it to debt regardless... But that's just myself, and I'm itching to pay off my car loan right now. Honestly, it doesn't sound like you're going to make a bad decision here in whatever choice you make.

[Baby_nurse]

Debt right now is at 38k. My goal is to clear that debt in 3 years. Adding the raise to my payments each month doesn't shave off any time and truly does only knock out $50 in interest in that time period (according to the debt payoff calculator I have been using).

403(b) isn't maxed out yet. I've just reached the limit for the employer matching. I also have a Roth IRA (no employer matching) that has room to grow.

EF stands at 20k in Money Market account.

There is a 4th option: do nothing with the money and just add it in to my monthly budget. The way gas prices are going up again, I may need it just to pad my gas budget.

[jpg7n16]

Debt right now is at 38k. My goal is to clear that debt in 3 years. Adding the raise to my payments each month doesn't shave off any time and truly does only knock out $50 in interest in that time period (according to the debt payoff calculator I have been using).

All debt is not created equal.

What interest rates are you being charged?

403(b) isn't maxed out yet. I've just reached the limit for the employer matching. I also have a Roth IRA (no employer matching) that has room to grow.

Depending on what rate of interest your debt is costing, you may need to reduce your 403b contribution rate until debt is cleared up. Maybe not. Depends on the rate.

EF stands at 20k in Money Market account.

Again, this depends on the rate you are being charged on the debt -- though it doesn't make sense to have tons of cash earning 0.5%, if you have debt charging you 6,7,8%+

There is a 4th option: do nothing with the money and just add it in to my monthly budget. The way gas prices are going up again, I may need it just to pad my gas budget.

There is a 5th option too: review your budget and make cuts elsewhere. Create your own "raise" by slashing spending.

This would free up more money for debt elimination, retirement savings, etc.

Would you be able to post your monthly income and expenses?