Lump Sum coming in....How best to use it?

Had a huge shift in my budget over the past year.

  • Haven't increased my debt in almost 1 year which means the budget is working.
  • Living about 1 paycheque into the future (really working towards getting a whole month ahead)
  • Built an emergency fund! $1500
  • Saving for a move that is going to happen in a few months when I know we need furniture, 1st & last etc.

Big question is:

Currently took on a part-time job (it was offered to me with a substantial raise and the likelihood of being full-time) so I am only making ~$400 less/mth working 3 days per week. (I also have a side-hustle tutoring during the school year but I have no idea how much that will bring in so I don't count it)

I have to decide what to do with the pension from my previous job

  1. It got commuted/vested and can be transferred to my new job (2 years of service)
  2. I can put some in a locked account (RRSP) and take ~5k cash
  3. I can take all in cash minus taxes ~14k

I am at the beginning of my career but have debts to pay off.

Credit card 0% interest $5800

Car 5% interest $6600

Other loan 4.5% interest $3000

Student loans....still huge!

 

Which option do I choose with my pension? Paying off some debts will free up my budget so I can make the choice to save some money. This will also alleviate the stress that debt causes. I also know how important it is to save for retirement.

 

HELP!

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  • You've been doing an awesome job!

    In my opinion, you'll do yourself a favor by transferring it to your new retirement plan at your new job.  In the log run, the money you'll gain over your lifetime vs. what you will gain right now if you take it will favor the long run by a great amount due to compound interest.  You're rates are actually not that bad on the debt you currently have and it sounds like you are just starting out career wise, so I'm confident in my statements.  Personally, I treat any money that goes to retirement as absolutely gone until retirement.  

    Freeing up cash flow is nice and get the idea that it might be less stressful to get it over with. There is value there, but it sounds like you are doing an awesome job already!  So, don't stress it.  If you are going to be making more money once you go full time at the next job you're going to knock out the amount of debt you have even more quickly! (Not counting Student Loans, I don't pay those off either because the return rate for stock indexes have been better then the rate of most student loans).  Don't let your standard of living expenses increase proportionately to your pay increase and you'll be fine.

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  • I agree that you should roll your pension into another tax-favored retirement account of some sort.

    Even without considering any tax penalties you might have, putting $14K into something now will mean a lot more in the future!

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