Kelly Blodgett launched Money Gal Coaching with a goal of serving people who, like her, were burdened by debt. You can get her tips for paying down debt on a regular basis at Bring Me The News, in addition to the Money Gal Coaching website and Facebook page. In her words, these are tips and tricks that she used to pay off debt.
Emergency funds are always a wise choice, but how should you balance your emergency fund when you have boatloads of credit card and student loan debt to pay down?
I think when we have a large emergency fund sitting in our bank account we can become complacent and we actually pay less towards debt each month.
Let me explain!
Before I started paying off my debt, I saved up $2,000 for an emergency – a baby emergency, if you will. I wanted to know that I could throw all my extra income towards debt, while maintaining the ability to avoid worrying about a flat tire.
But as I started making progress, only having $2,000 in the bank scared me. I was constantly thinking about possible emergencies and I would be screwed.
The ironic part is that I never had an emergency fund before. It was strange, really. The journey that I was on to pay off my debt made me more aware and responsible with my money. The truth was that the $2,000 was not a baby emergency fund, it was the only emergency fund I had ever had.
I wanted the full emergency fund because I wanted to know that if something happened, I was prepared. If I lost my job (which unfortunately we all know too well right now) I had time to find something I loved versus being forced into any job just to keep a consistent paycheck coming.
Bottom line: It's important to keep some money saved while you're paying off debt.
A starter idea for you to consider:
Save $1,000 for each member of your household before tackling debt.
- Once you have your baby emergency fund, focus on your plan to pay off debt.
- Once you are debt-free, save 3-6 months of expenses and set it aside in a high yield savings account for a higher interest rate.
My point: If you want to pay off your debt and attack it full-on, save the $1,000 per person initially before you start making extra payments to your debt. Once your debt is gone, you can save up 3-6 months worth of expenses that experts say we should all do.
Not sure how to get started with a plan to get out of debt? Group coaching starts in a few short weeks. Click here to learn more about the program and reach out anytime with questions during your journey. Bring Me The News readers get a discounted price of more than $50 off, click here to join at the discounted rate.
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