Is Debt Repayment or Saving Queen?

In budgeting, the balance between debt repayment and saving is the hardest for me.  I grew up on Dave Ramsey’s 7 Baby Steps, the first half of which is to save a thousand, and then don’t save anything until you have no debt. It’s a great principle if you’re drowning, but doesn’t fit well with my risk aversion. I need to be growing my worth as I’m repaying my debt in order to feel “safe” financially. It makes me feel like I’m moving somewhere if the balance of my bank account is growing while the amount I owe on my student loan is shrinking. Learning that about myself has really helped me shape the way I’m utilizing money. I want to feel like I’m going somewhere, and the few months where I did nothing but chuck money towards student loans really stressed me out.

Hubby is more “Let’s kill the loans”, especially because we have such a generous emergency fund. Since I’m in charge of budgeting (we have meetings to discuss things and stuff. But I’m the shopper, bill payer, so it makes sense I work with the monies), I really need to make sure I’m balancing my need for a positive net worth with his need for no loans.

It’s actually a little harder (for me) than it sounds. I’d rather put minimum payments towards the loans until we’re at 0-day, and then crunch debt and pull back on savings. It doesn’t make as much sense in practice because of interest, but I’m currently in my grace period, so interest isn’t as much a factor. He’d rather keep the savings accounts where they are, and pound out the debt, shoving as much towards loans in the grace period as we can.

His approach has merit (more than mine, if I’m honest), and I’ve definitely incorporated it into our money strategy while still honoring my need to save.

Debt Free

My husband was blessed to come out of college without any debt. His parents invested in Amazon when he was really young and used that to pay for his tuition. He also went to community college and then transferred to a four-year.

I wasn’t blessed with any life-shattering stocks, and I went straight from high school to a private 4-year. That being said, I got really good scholarships, and I graduated with only 32k in debt. Just a fraction of the price of my school (it’s 44k a year to go there). I want to be debt free as quickly as possible. In fact, when hubby and I were dating, we shoved anywhere between 800-1000 a month (starting in Jan) towards the suckers.

When we got married, things changed a little bit. Life was more expensive (thanks healthcare), and our priorities changed. But the last two months we’ve chucked $600/mo towards those suckers, and we’ll be on track to hit 7.5k down by Dec 31st. It’s not quite the 10k I was hoping for. But learning to roll with the punches has been really important as my financial literacy has increased.

Savings

Not gonna lie, we definitely could have put tons more towards loans, but savings is a huge deal to me. Ever since I was 15, I’ve always had around 3k in savings. The one time I didn’t, I had just finished a semester studying at Oxford and had used it all travelling. But other than that AT LEAST 3k. At all times. So saving is a huge deal for me. So huge, in fact, that we have several different accounts.

1) A cash account. Anytime someone gives us cash (mostly me, if I’m tutoring someone who pays in cash), we shove it there. That’s gonna pay for our road trip next year. And it’s probably just under 1k. I try not to count it too often or fixate on the numbers. That’s something that would drive me crazy if I let it.

2) An E-Fund. This fluctuates, we’ve had several car emergencies this year (one day, I’ll write a post on that, haha. I have the worst luck with cars), and we’re currently repaying it again, but it rests at ~8k. (This is also where save for my independent contracting taxes, so some of that is earmarked for April).

3) Fun Money Fund. This is our vacation account that we started a few months ago. All of my extra tutoring money goes here, and it’s at ~1.2k

4) 401k. Obviously, retirement is super important. Because I’m the kind of person who would obsess over gains and losses. We’ve opted out of the online tracking, and I’m not actually sure how much is in there, but I do know that we contribute 15% of my hubby’s paycheck, and (as of this month, because he made his one year mark!) his employer matches 3%. It’s probably around 2.5k if I had to guess.

It’d be really easy to take the cash account or to take the fun money account, and toss it towards loans. If we did that, we’d hit our 10k goal for the year, something I’m not sure we’ll be able to currently. We could also reduce our 15% contribution to 12%, and with the match, still put away the same amount as last year. However, we’d be sacrificing some of our other goals.  Goals that are important to us.

Being debt free exceptionally quickly would be incredible! I’m not gonna lie, there are some days when I think about what all we could do with that $600/mo if it weren’t being paid into the void. But I’m not willing to give up the quality of life to do so. That’s why finding the right balance was hard for me.

I’m a go-getter, and money is the tool that allows me to do that. Money lets us take road trips, and visit Hawaii, and go home for the holidays. My education was amazing, and I’m okay paying a little longer for it if it means I get to experience the world now.

This isn’t entirely delayed gratification, though.  We still throw double the minimum payments towards loans. We still pay enough to make it hurt towards them. We still bust our butts. We just do it without neglecting our other goals.

That’s the balancing act. How much is enough to make it hurt, but not enough to sacrifice the things we ACTUALLY care about? It’s a question I’m not sure I’ll ever answer satisfactory, until the day they’re gone!