Of course compared to the "average American family" we have very little non-housing debt. Just a few thousand on various cards, a few hundred left on Mels student loans, a few thousand to the furniture store, and our two cars.
Apparently, the average American family currently carries something like $20k in total unsecured debt (that's mostly debt other than vehicle loans or mortgages; like credit cards, lines of credit etc...). Not counting the legal bills , we're WAY under that (hell, 3 years ago we had essentially zero debt).
I get to do this, because I just had my official formal performance review signed off. I got nothing but the top two grades, scored very well on all my individual growth and performance goals etc...
So, I got my official bonus notification. Combined with the fact that we as a group made our full goals this year, our division made full goals, and the corporation as a whole made 90% of our goals; I'm getting 90% of my max "regular" bonus (we have a special 150% bonus rate if we reach more than 110% of goals) . Of course it's split in half because half of 2008 I was a contractor, but it's still a pretty solid chunkachange.
Oh and because I'm an "executive level" employee I also get a fairly substantial option grant, at todays rather depressed pricing (we're down about 60% on the 12 month; and with our actual earnings should be up somewhere around $30 a share. When the government stops screwing with the sector, I expect the stock to recover to that $30 level within a few months). Of course that won't vest for three years, so it's not money in the bank ; but it's nice to have (oh, and my 401k is positive on the year, after a 20% loss last year).
Anyway, unless I got my numbers wrong, or payroll does something silly (sadly, entirely possible with bonuses), that shouldn't bump my tax bracket for bonus withholding (I'm WELL under the next bracket); so I should come out with enough left after taxes to pay down essentially all of my remaining debt except our car loans, and the legal bills.
I could use it all on the legal bills, but it wouldn't make much dent, and then we'd still have the high interest debt that we'd have to service monthly, reducing our ability to service the legal bills.
Actually though, what I may do is pay off a little more than half the "other stuff" (credit cards, furniture, random), and take the rest and pay off our truck loan... Or better, leave just a few hundred bucks on it; which keeps an open "pays as agreed" loan on the books, improving our credit score, while effectively reducing our payment to nothing.
That's a few hundred a month we could certainly deal with having back in our coffers; and instead of getting killed on a trade when we go to buy a new truck, we can finish the payoff, sell off the truck privately for 3 times as much (yes, we checked, it's really about 3 times as much) and use that as down payment.
So, why not buy something nice, or take a vacation... stimulate the economy etc...?
I AM stimulating the economy. I'm deleveraging, which is the real stimulus this economy needs.
As I said above, every dollar less debt is more like $1.10 or $1.20 (or more like $2 if you just make minimum payments) in cash in hand. It improves our credit rating, and opens the way for future spending.
First you pay down high interest debt (high interest is anything higher than you can make in a CD, bond, or money market account - which right now is essentially nothing), then you build savings (because debt costs you more than savings earns), THEN you spend money.
It's simple really. Hell, most of the trouble we're in right now is because people forgot about the basic rules above.
Next year, presuming the bonus comes, it'll be twice the size; and I'll use that to pay off most of the OTHER car loan, what will hopefully be the very small amount left of the remaining legal bills; and then save the rest towards a down payment for the acerage we want in New Mexico, Nevada, Utah, or Idaho.
An aside: We're looking for good, cheap land, with water, much milder summers than here without excessive humidity, and winters no worse than northern New Hampshire, privacy, good tax and gun laws, no more than 2 hours from a major regional airport, and no more than 1 hop from a hub city.Anyway you slice it, this is a lot less hanging over our heads. Now if we can just get out from under the legal bills, we can actually start saving again.
That has us pretty much limited us to those four states out west; plus maybe Kentucky, West Virginia, Tennessee, North Carolina, and New Hampshire back east... and most of those are iffy for one reason or another.
