Debt free at last – now what do I do

The one downside to my recent move and career change was that I put myself in a hole financially. Part of this was due to switching jobs and having no income for almost 2 months, part was the expense of moving, establishing myself in a new area, and furnishing a 3 bedroom house, part of this was due to my having rewarded myself for my new position with a relatively expensive HDTV, and part was due to my less careful control over my spending. I’m making more, after all, and a little ….excess seemed in order.

Still, I plugged away at the debt. When I first moved in March, I gave myself 6 months to clear it off my credit card. It took me 8 months instead, which all things considered is not too bad. Now the question enters: after Christmas (which for the first time in my adult life will not put me in a serious financial hole: my family agreed to move to a secret santa model), how should I best spend my monthly budget surplus? I could continue with ridiculous excess: buying an xbox 360, a PS3, a Nintendo Wii, a Velomobile or at least a recumbent bicycle, additional home theater equipment upgrades, and more broadly expensive consumer electronics and gadgets, of which I’m inordinately fond. I could start saving aggressively, with an eye towards buying a house or at least recharging a savings account that’s sadly depleted after several years of career changes. I could try to quickly pay off my car loan, which right now sits at about $8.5k and is just a little higher than the overall debt I incurred in the move to MA, meaning with a little discipline and a nice tax return I could have it paid off by next fall. Or, the most likely scenario, I could find a balance of the above.

We’ll see how this plays. I’ll be making the first decisions in January. I’m tempted to flat out focus on paying off the car, but some reading of financial advice columns has left me with this sense that conventional wisdom says ‘debt is not bad, especially when it’s low interest,’ which my car loan is, and that I might be better off simply dumping money into savings where it will draw a higher interest rate. I have to balance that against the fact that there is some sentiment that the dollar is about to collapse (after the housing market does) which could leave me with a pile of savings worth nothing, in turn leading me to wonder if I should focus on tangible assets like, for example, my toys πŸ™‚

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