If You Just Paid Off Your Car Loan, Please Don’t Listen to My Sister-in-Law!
Hit Pause and think about your next financial priority
(Initially published on Medium.com, 07-Aug-2025, feature Photo by Kazuo ota on Unsplash)
Did You Recently Pay Off a Major Purchase Loan?
If you recently finished paying off your car loan or other major purchase, congratulations! Well done!
Please don’t listen to my sister-in-law about what to do with that newly available cash flow each month.
My brother told me he finished paying off his pick-up truck loan.
Before the COVID pandemic, his loan payment was $1,300 per month. He was able to get it adjusted down to $1,100 per month back during COVID. He just made his last payment. Woohoo!
The loan payment was a larger portion of their monthly expenses, so paying off the loan had a big impact on their budget. That’s $1,100 more cash in their pocket every month! Again, woohoo!
What NOT To Do With Your Extra Cash
My sister-in-law’s response was,
“You need to get a new truck, now.”
Me in my head: “ARGH!!! NO!!!”
I don’t know her reasons for saying that, but thankfully, my brother pushed back and said,
“No, I’m going to keep it a bit longer.”
His truck has high mileage, but it is running fine. It has more life and service to give.
Complicating things, they recently paid for a $4,000 air conditioning system repair. It’s Texas and summertime, so it needed to be done. They had to pay for the repair with their credit card.
They are still paying down the credit card balance with interest charges added every month. Ugh…
I get it; it’s tempting to spend more when you get more cash in your pocket each month.
I was surprised by my sister-in-law’s response; she knows they have credit card debt.
This is an example we’ve all seen before: folks can use emotion instead of financial logic when making money decisions. I’m sure we all have examples of ‘buyer’s remorse’ when we bought something we wish we hadn’t.
Tips of What You Could Do With Your New Extra Cash
Their story resonated with me to share some tips on what you could (should?) do with your newfound cash flow:
- Hit Pause. Don’t immediately figure out new ways to spend the money on something else.
- Review your finances and budget. Where can you best make use of this new cash?
- Pay off highest interest rate debts, like credit cards.
- Build up an emergency fund worth three or six months of your expenses. But, figure out what amount makes sense for you — this sort of general rule is just that — a general rule. Reference the above $4,000 air conditioning bill, maybe a larger emergency fund should be created.
- Start saving for a new car or other upcoming large purchase. You know the truck will need to be replaced at some point — save that loan payment in a separate account to put towards a deposit.
- Start investing for your family’s future. By investing, you’re putting your money to work to grow for your future — you can’t have a money tree if you don’t plant one!
Some combination of the above may be the right mix for you and your budget.
None of this is new or novel advice, but I thought I’d share since it seems we can all use a reminder from time to time. My sister-in-law, and perhaps someone in your family, could use this reminder.
It’s not my place to tell you what to do with the money; I don’t know you or your circumstances.
But, I do know it’s helpful to pause and reflect on how to best use that new cash flow, or you’ll find yourself in the same financial situation as you were in before the loan was paid off — and only you can say whether that is a good situation or not.
Whatever you decide to do, make it intentional and planned, not an emotional response.
Enjoy Life and Thanks for Reading,
-Jeff
