More on debt and investing

We are going to be able to pay off our debt more quickly than I thought. Which is good, since we probably won't get much of a tax return. Even without making the slightest attempt to curb our spending, we are chipping away at the debt. In the spendiest part of the year. While stocking up on meat and freeze-dried goods on top of the holiday spending.

As for our tax return being small, I took the maximum amount of exemptions that we qualified for, and have paid very little in income tax. With buying the house, we may get something back. I'm just not sure.

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Someone wisely commented on how I really should have more $$ in savings on my last post - about 10 times more - and wondering how I could feel more secure with investments than savings. Well, it's not entirely rational, but there is a psychological reason I prefer stocks: I am less likely to touch them than savings.

Let's face it, the biggest risk to my savings isn't the economy or Microsoft's stock price. The greatest risk is my own bad spending habits. I am unlikely to lose even half of my savings from market volatility. If I did, though, I'd still have 50% of the money I set aside in the market. On the other hand, there are much higher odds of me spending 100% of my savings for a non-emergency if it's just in the bank. Then I am left with no savings at all, nothing but some stuff - or, more likely, memories of eating out unnecessarily and some extra pounds around my middle.

I get emotionally involved with saving through investments in a way I just don't about savings in the bank - something about the gambling nature of it all, the possible big win someday. Paying off credit card debt has a similar emotional force for me. In the end, that emotional force matters more than a set 3% rate of return in an online bank or the potential 20% loss due to market volatility and needing to withdraw at a market low. I just can't trust myself to keep $$ in the bank for very long, once I get past about one month's buffer. But I'm darned if I'm going to sell stock at a loss for anything less than an emergency, or keep paying those credit card APRs forever! For that, I will be the most frugal gal in town!

Plus I get a 10% discount on MS stock through the employee purchase plan that can help offset volatility. So that also helps me feel more secure about buying MS stock. Yes, I know I should diversify, but I really can't try to do this perfectly right now until our household gets more organized and I have more time. And that 10% buffer is too enticing. Then, too, the odds of MS tanking and wiping out all of my investments are really low - although anything is possible. So I'm putting all of my money there, until things calm down and I have a chance to think and say, "What do I really want to do with this money I'm saving each month long-term, now that I'm used to setting it aside?"