9/22/2015

$10,000

Some of you know that the company I used to work for has an employee ownership model.  As part of that, I own shares worth $10,284.30 USD.  If the USD/CAD conversation rates stay about where they are now, the refund should wind up being closer to $13,500 CAD. I should note that it is not an option to maintain my shares if I'm not an employee.

As per my shareholder agreement, the company has up to six months from my departure to sell and issue a refund to me.  I've confirmed that I will receive the money in USD in a cheque.  So, sometime between now and the middle of February we'll get a cheque and need to have a plan for the money.

I've always considered the money invested in shares part of my retirement plan, but now that the funds are being paid back, I'm feeling a bit torn.  Jordan and I chatted about it over the weekend some and he's also a bit conflicted.

Here's the options that we're thinking on:

  • Keep the money fluid in my TSFA 
  • Pay off the Kia 
  • Pay off half off the LOC debt
  • Move the money to RRSP
Keeping the money fluid does have it's advantages.  Certainly it would fully fund our emergency fund and then some.  We don't know what type of job I'll find next year, so it might be good to have this as cash to remain flexible.  This also opens us up to spending the money even if we don't really need to.

Paying off the Kia is a super attractive option.  The interest rate is 0%, and as of today we owe just over $15,000 on it - so it would be so so close to being paid off with the share money.  We pay a little more than $250/month on the car and not having that payment would give us a different type of month-to-month flexibility.  That money could be redirected to paying off the LOC - going from $500/month to $750/month, or directed to savings that we've had to pull back on because of going on EI. Putting the money towards this debt has the advantage that it can't be 're-spent' unlike the LOC.

Paying a big chunk on the LOC would make tackling the rest of it feel actually achievable.  Since using it to build the garage and fence on our Alberta house, the balance has gone up and down from $19K to about $25K. Currently it's sitting at $23,500 - so the share money would get this down to a manageable $10,000.  The interest rate on the LOC is 5.73%, so from a financing charge perspective it makes more sense to lower this debt than the Kia as well.  The minimum payment would reduce by about half which would give us equal month-to-month flexibility that paying off the Kia would give us (reducing the required paying by about $250).

Last option would be to just move the money into RRSPs.  This wouldn't impact our cash flexibility in anyway, but would lock in the money to long term savings which was the original intent of it.

So, what do you think?  Keep the money as cash, pay off debt, or move the money to long term retirement savings.  We could really use your thoughts on this one.



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10 comments:

  1. I was originally leaning towards LOC but because the original intent of that money was for retirement I would go the RRSP option. I would then use the tax refund to help knockdown the LOC. I'm definitely not leaning on the side of the Kia repayment.

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    1. Thanks for weighing in!! I hadn't factored in the tax refund and what we could do with that.

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  2. It's tempting to pay down your debt, but you might want to keep it aside in your emergency fund. You have a lot of unknowns in your future, you don't know if you'll be working, and if you are how much you'll get paid. You'll have a new baby and there might be unknown expenses that come up. You still have your house in AB (I think) and you're trying to sell it to move to BC. Your husband hasn't been with his new employer that long.... and the list goes on. Just lots of stuff. Having that money set aside for a while, just until the dust settles can be very reassuring. That's just my opinion.

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    1. It's so very tempting, you're right!

      You're describing on of the core conflicts about what to do - the 'what if' conflict. What if it takes me a while to find a job, what might that job look like/pay etc. Very true about the baby too. You make a good suggestion about not necessarily deciding right away - but stashing the cash until things settle a bit.

      I think that could also happen for us, if my employer takes until February to pay rather than doing so in the next month or two.

      Delete
  3. I agree with Anon. I would keep it liquid for now. There are a kit of unknowns. Plus, there could be a move in your future. I would still try to aggressively pay down the LOC with your regular budget though. Sorry about the job loss. I really feel for you.

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  4. I don't know why it can't be a combination...
    Perhaps if you pay down the LOC and fully fund the Emergency Fund it will be a good compromise.
    You didn't mention anything about taxes, but are there tax implications? If there are, you might need to consider contributing to RRSPs to offset that.

    I am also very sorry to hear that you have experienced a job loss... It is a lot of added stress during your pregnancy.
    DTN

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    1. It sure could be, and your idea about the E-fund and the LOC could be a winner. It might be time for me to refresh what the emergency fund goal should be and see if we could use some of this money to get to 100%.

      I'm going to have a capital loss rather than a capital gain. I haven't had that before, so tax time will be a bit interesting.

      Thank you for the well wishes, it's a challenge and I'm struggling a bit but trying to stay positive and motivated while we wait for baby to arrive.

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  5. I would probably fully fund the LOC leaving a tab on a spreadsheet for myself that if I had an emergency I could tap up to $10K as an emergency fund from the LOC. This tackles both having emergency dollars if needed but also cuts out a 5% expense that I'm guessing the emergency fund couldn't gain you if it was sitting aside. If you want to get even more specific you could then reinvest that 5% into your LOC, put it towards those retirement savings you want, or if you found you needed it add that to your cashflow.

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    Replies
    1. That's an interesting way to handle it to! Thank you!

      Delete

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