In my house, we just celebrated a huge milestone. We made our final payment towards our daughter’s daycare. That’s $660 per month back into our budget. Or is it?

Due to our precarious financial situation over the last few years, my husband and I have fallen behind in some specific areas; namely, retirement savings, increasing our emergency fund and saving money for our daughter to go to college. Now that we have this money that’s not obligated towards a service, the logical step seems to be to divide that extra money into those areas (which would increase our current contributions made with money previously reserved for debt repayment).  We’re already used to the money being spent so it’s not like we’d miss having it every month. But the more I think about it, the more I think that maybe that money could have some other uses.

Here are a few ways I think we can spend that money:

• School. Even though she’s no longer in daycare, my daughter will be in school. And along with school comes expenses. Clothes, class pictures, field trips, book fairs, teacher gifts, school supplies…a whole list of items to pay for. Perhaps it would be a good idea to set some of that $660 aside every month for these types of quasi-surprises. That way the money is there and we don’t have to scramble.
• Extracurricular activities. I am a huge supporter of extracurricular activities. I think they give kids a chance to enrich their education, meet kids from different schools, and apply their skills in other areas. As a result, my daughter is usually enrolled in 1-2 activities. Because we do most of them through our YMCA, they’re a lot less expensive. However, less expensive doesn’t mean free. Maybe some of that extra money can go towards paying for these activities and whatever “equipment” might come with them.
• Student loans. My husband still has student loans to pay off. Like a lot of student loans to pay off. We have a plan to pay them off before we turn 40 (we’re 34 and 35) but putting this money towards his loans would make the payoff that much quicker.  This is probably the only debt we have that I resent (it’s a long, sordid tale) so the sooner we can get rid of it, the better.
• Add it into our monthly budget to pay bills. Right now, I’m on leave from my job and we’re not sure if I’m going to go back. If I don’t, we’re going to take a huge financial hit by losing my salary. Having that $660 per month in our budget to cover expenses will ease that burden and give us peace of mind.
• Do nothing and wait to see where we need it the most. This is probably what makes the most amount of sense to do but I am so crazy with allocating my money that to leave it there, without a purpose, makes me twitch. I feel like if it sits there, we’re going to spend it frivolously and then when we do need it, it’ll be gone. Which is a terrible, horrible, awful, no good, very bad feeling.

Then there’s the matter of private school tuition. Although we’ve signed Erica up for private school, we’re still debating if it’s the right choice, mainly due to financial reasons. Our feeder school isn’t as bad as it used to be and provided all goes well with selling our house, she’d only be there for one year. However, if we can opt for private school, that money we’re saving by not having daycare will most likely go towards tuition.

So. Many. Choices.

Since I’m a planner, I like to have every situation mapped out before I make a commitment to one thing. Figuring out what to do with this money is going to mean my husband and I need to have a long talk. And although we don’t fight about money, I’m a little nervous for this discussion (because we have completely different opinions on the whole school issue).

I’ll let you know how it turns out.