I’m a debtor.
I’d like that to be otherwise, but I’m pretty close to the limit of what I can do to change that. Don’t get me wrong, it’s changing, but there is a limit to how many side projects I can take on at one time. So, I’m in debt and likely to stay that way for the next couple of years.
As part of my budget, I set up a few categories of items that are either necessities or “really wants” without being immediate expenses. For example, I’m setting aside some money each month for car repairs, even though my car isn’t currently broken. When it comes time to fix something, I hope to have the money available to fix it, without having to scramble or <spit> tap into my emergency fund.
All told, I have about a dozen of these categories set up, each as a separate INGDirect savings account. Twice a month, a few hundred dollars gets transferred over and divided among the savings goals. Most of these goals are short-term; they will be spent within the year, like the account for my property taxes. Some of them are open-ended, like my car repair fund. Some are open ended, but will eventually end, like the fund to finance my son’s braces. All of the accounts are slowly growing.
As I’ve watched the progress of my savings accounts, I’ve noticed something funny.
My confidence is up.
It may only be a few thousand dollars, but it’s more money than I have ever had saved. The vast majority of this money will be spent over the next few years, but having it there, now means that I have tomorrow covered. For the first time in my life, I’m not living paycheck to paycheck. No matter what happens, I know I can make ends meet for a couple of months. That fact alone has reduced my stress level more than I could have imagined.
Two years ago, I was sure I was going to file bankruptcy. Now, I’m looking at being just two years away from having all of my debt gone. I have faith that my future will be bright, and only getting brighter. If I can dig myself out of this hole once, I can do it again, no matter what happens.
This has brought a calm that I can’t easily explain. I don’t have to worry about where next week’s groceries are going to come from, or how we’re going to afford braces in a couple of years.
Having an emergency fund and some auxiliary funds has been entirely worth the work we’ve done for last two years. Have you noticed any changes as you pay off your debt and build savings?
Thomas
Absolutely! My wife and I have been in debt-repayment mode for the past 1.5 years (since we got married) and just made our last debt payment this month (a full 2 years ahead of our original schedule)!
While paying off our debts, we did, just as you have, start a number of different savings categories. We feel much more secure and confident now with our financial position. Not only have we done away with the monthly debt obligations, but we have a solid savings to draw on as emergencies, car repairs, and other things we’ve been putting money aside for come due. In fact, just recently, our minivan needed $2,000 worth of work and we were able to pay cash for it! What an empowering feeling!
Jason
That’s awesome. Two years is forever.
Thomas
Yeah, I know. When we first set out to eliminate our debt, we were looking at nearly four years, which seemed like an eternity. Needless to say, facing an ‘eternity’ of debt is not very motivating, but we kept plugging away at it and became increasingly motivated by how fast the debt began to fall. It almost became a game with the objective being: Squeezing out as much money as possible from each month to put towards debt.
HANG IN THERE! Two years will be here before you know it. And who knows, you may even reach your goal early! How awesome would that be?!!
Jason
Originally, we were planning for 6 years. According to my debt spreadsheet, we’ve got almost 3 years to go, so we’ve cut the time in half already. I’m sure we can manage it in two.
Well Heeled Blog
Congratulations! That is some exciting progress. Having money saved makes a lot of problems seem more manageable (speaking from someone who will be incurring some unexpected health costs this year).
By the way, I came over by the way of Squirrelers.
Jason
Thanks!
Moneycone
From getting close to a bankruptcy to being almost debt-free, great job on managing your debts!
What made you do it?
Jason
The first glaring signal that I needed to fix something was when we found out my wife was pregnant with baby #3. We’d been counting on not being as efficient as we were in getting her, since her sister took 2 years of trying. I looked at our cash flow, tried to figure out how to add another kid in diapers and daycare, and almost keeled over. It took a few more hits over the head to really get it, but that was first.
Moneycone
As a new parent, I can relate. Thanks for sharing!
Cash Advances US
When I started learning about investing, I use to imagine investing money so I could enjoy the dividends now. Eventually I realized that would just raise my taxes and interfere with compounding interest. Now I think about saving money in terms of goals, instead of interest payments or dividends. Before spending money, I decide if this is the absolute best way I can spend the money to maximize the benefits to me. Sometimes buying the item is worth it. Other times I decide I’d rather have more money for retirement investments, paying off the house early, or saving towards a specific big item purchase.