After going through my bank accounts and my loans, I decided to take all my saving of $3,000 to fully settle my credit card loan of equal amount.
However after my Financial Planner helped me with your budgeting spreadsheet, I realized that I did not set aside some cash for emergency.
The emergency cash buffer is important. The financial planning theory teaches that it is important to set aside at least 6 to 9 months cash buffer for emergency. Failure to do so may result in more worst financial implication. Therefore after taking the financial planner’s advice, I set aside cash $500 for emergency use. I finally settled $2,500 on my credit card loan.
On looking back at my financial track records, I realized how silly I was to keep the idle money of $2,500 in my bank account which only earned me 3% a year. On the other hand, I got to pay 18% to the bank for my credit card loan. This show that I was net incurring extra interest of 15% (18% – 3%) by allowing the $2,500 attracting 18% interest and earning only 3%.
This is how budgeting spreadsheet has help me to identify my priority in fund allocation.
Stumble Upon
Del.icio.us
Buzz
