It seems that at least once a week, I read a post containing a question that basically says “I have extra money.  Should I do x or should I do y?”  The options are usually pretty financially sound things, like “Should I pay off my mortgage or invest?”  “Should I pay off my student loan or increase my retirement contributions?”  “Should I stash the money in my mattress or send it to Money Beagle?”

OK, so I’ve never seen that last one but the answer in that case is clearly: Throw the dog a bone!

In most cases, I first applaud whoever it is for thinking about making a wise decision.  In most cases, there’s no right or wrong answer. Many factors can go into making a decision, such as expected rate of return, inflation, debt aversion, etc.  They’ve all been covered so I won’t go into them here. Instead, I’ll go straight to the advice:

If you’re asking for help in picking between two options, then clearly both hold appeal to you.  If you’re really not sure what you will be happier with, why not try both options for awhile?

Take 50% of that extra money and grow your emergency fund.  Take the other 50% and apply it to your student loans.  Or whatever.  As long as the two things are either increasing your assets or decreasing your debt, we’re cool.  But, if you aren’t sure which is the way to go, go for both!

I figure that you’ll eventually get a feel for which one you want to concentrate on.  If, after a few months, you get more excited by the loan balance falling, then by all means go and tackle that loan.  If you start sleeping better knowing that you have a better emergency fund cushion, then go ahead and build that up until you’re sleeping a full eight hours.

Or, maybe you’ll find that splitting it up is exactly what you want to do, and you stick with that.

Either way, if you’re unsure of which way to go and they’re both ‘good’ options, try both.  My guess is that you’ll find your answer soon enough.

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