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Ask Dave

Starting A Slush Fund

Troy has a surplus from his small business. He can't decide if it should go toward his debt, or ideas for his business.

QUESTION: Troy is getting married in 3 months and has been working the Baby Steps. He only owes on his house and owns a small business. He had a great year and should make $130,000 this year. They will owe $68,000 on the house. Should he put that money on the house or into the business?

ANSWER: You should always hold a retained earnings fund in your business, called a slush fund. It’s the equivalent of an emergency fund or opportunity fund. Once you’re past that, bring home the rest of the money and pay off the mortgage. It sounds like you could hold back $15,000 or so in the slush fund and knock the devil out of this mortgage, then finish it off next year.