He's called me - and has a question for all the Jessie's Money reader's out there.
Unlike Frugal's partner H, who's Boss in an Ass, his employer actually tracks and pays for vacation properly. He's just found out that he has $527.39 worth of vacation left to take from 2009. His employer is giving him the option to carry it forward to 2010 or to have it paid out. He'd like your/my help in figuring out what to do.
I'll break this down for you.
His annual salary is $38,400 (or approximately $18.46/hour). That means the above mentioned amount of vacation is worth 28.56 hours or 3.57 days (based on an 8 hour work day).
Jordan mentioned that after taxes, his net pay was $30,000 which means his marginal tax rate is 21.88%. So, if we deduct 21.88% from $527.39 Jordan would receive a payout of approximately $412.
He has given me these five options:
- Leave the 'money' as vacation, and use it during the year. I kind of like this idea because I get 3 weeks vacation each year, and Jordan gets 2 weeks. Keeping the 3.5 days would mean we could take more time off together.
The next four involve having the vacation paid out.
- Use the money to play - new video games or some other such thing!
- Use the money to contribute to his newly opened RRSP (currently has about $550)
- Use the money to contribute to our house fund
- Use the money to pay down his only debt, the personal loan we took out to get him a truck.
With regards to the debt, I'll give you some details.
We took out the loan for $4,500 a while back, and Jordan was making payments of $216.06/month - which would have the loan paid off in two years, $8 of that payment was also for loan insurance b/c at that time our jobs were uncertain. In September '09, Jordan increased his payments to $150/bi-weekly which shaved off about 6 months to the re-payment timeline.
The loan is currently sitting at $2514.59 w/ an interest rate of 9.25% - which leaves 17.88 bi-weekly payments left or a Debt Elimination Date of Sepetember, 2010.
If he uses the money to put towards the loan, it would result in 14.95 bi-weekly payments, or give him a Debt Elimination Date of July, 2010.
Phew - okay, so I've obviously put more thought into the debt repayment option - but don't let that sway you (it's just kind of what I do).
So - what should Jordan do? Should he keep the vacation as vacation or should he request a payout. If he get's it paid out - what should he do with the $412 he'll receive...
Phew - okay, so I've obviously put more thought into the debt repayment option - but don't let that sway you (it's just kind of what I do).
So - what should Jordan do? Should he keep the vacation as vacation or should he request a payout. If he get's it paid out - what should he do with the $412 he'll receive...
Thanks All!
I would vote for saving it as vacation time. Money is nice, but paid time off is GOLD. GOLD!!!
ReplyDeleteMy second choice would be putting the money towards his debt.
Did you have anything planned for a vacation? If not I'd probably vote for putting it towards the loan. I guess it depends whether you'd rather have that time off together, or shave two months off the loan (which doesn't sound like much but probably is).
ReplyDeleteFrom a money&time hoarder perspective, if you do (like eemusings says) have a vacation goal in mind this year, I'd save it for that. If not, then I would take the money and pay off the loan.
ReplyDeleteThe interest is pretty high on the personal loan, so that's my vote.
ReplyDeleteIf he can still cash out next year if he doesn't use it all, I'd say save it for vacation.
ReplyDeleteBut then, I LOVE vacation time and think it is worth more than $$$. =)
I would carry it over! That way you can have your 3 weeks off together next year!
ReplyDeleteAnd he's lucky his boss isn't an ass! ;)
I'd pay off some of the outstanding loan balance. But that is me. You might want to keep the vacation time so that you can spend more days off which may be well worth it to you two. - That's the great and difficult thing about personal finance, isn't it? There is not one correct answer.
ReplyDeleteI vote 100% for carrying the time over, to me it seems like the best option!
ReplyDeleteCalculate the actual dollar amount difference in interest on the loan, instead of length of time for loan. For example, for ease sake let's use a round number of $100.00. Then ask what is more important to Jordan. The dollar figure of $100.00, (or what the real $$ is) or the daily figure of _____ extra days off. It has always helped me if I knew EXACTLY what I was trading ... what for what.
ReplyDeleteTough one. I think I would personally put it toward the loan only because the interest rate is so high. Maybe you two can start a vacation fund together and plan to use the next years vacation pay toward it as well. Tough call though, you both deserve a vacation! Let us know what you choose!
ReplyDeleteOne of Jordan's goals is to raise his credit rating by utilising different forms or credit. Unless he decides that more time off is more important (and why does he have carry over? I thought he took his 2 weeks) He could take out an RRSP Loan for $400, and use this vacation $ to pay it off. Or, if he has lingering Christmas on his CC, he could pay that off and start the new year right.
ReplyDeletei say roll it over!
ReplyDeletetake it and pay down debt.
ReplyDelete@Mom - I have carry over due to the fact that my employment date started Aug 8th of 2008. Of which time I didnt take any vacation hence the roll over.
ReplyDelete@Frugal Dreamer - aside from not having a performance review since ive started working here... its been great. I've been blessed with having only 2 bosses ever that were intolerable.
All - I am going to cash in the vacation pay as being able to have the truck paid off during the month of July (which is my birth month) that'll be my xmas present to myself :) Also I was planning on re-investing my tax return for our savings goals... so either way I win :)
Thanks for all the feedback on my situation