Breaking Free from Debt: A Lesson in Savings
After graduating college, I was determined to tackle my $31,000 student loan debt head-on. The thought of being debt-free in just five years drove me to throw every spare penny towards my loans. Saving money on the side seemed like a luxury I couldn’t afford.
A Wake-Up Call
However, when my first loan payment rolled around, I hit a roadblock. Despite saving double the amount of my payment, I couldn’t make the payment directly from my savings account. This minor setback forced me to reevaluate my strategy. Transferring the money to my checking account before making the payment made me realize I didn’t want to wipe out my entire savings.
A New Approach
I decided to keep $100 in savings and use the remaining $500 towards my loan. This marked a turning point in my approach to debt repayment. I started working two jobs and created an emergency fund to fall back on in case I lost my job. Over the past year, I’ve learned that having a cushion in my savings account has been a lifesaver.
The Importance of Emergency Funds
My savings have fluctuated, but I’ve used them to pay off credit card debt, cover unexpected expenses like car repairs, and even buy a new computer. I’ve made sure to maintain a balance in my savings account, rather than draining it completely. While I still make my loan payments every month, I prioritize saving over paying extra towards my loans.
Setting Goals
After reading up on personal finance, I set a goal to save $2,000 in my emergency fund by the end of 2015. I’ve since landed a better job and now have the time and resources to work, write, pay down my debt, and build my savings. My ultimate goal is to have enough in my emergency fund to cover three-to-six months of expenses.
A Better Position
Looking back, I realize the flaws in my original plan. Having a safety net has allowed me to tackle unexpected expenses without going into debt. When my debt is finally paid off, I’ll have a sizable sum in savings, giving me the freedom to make bigger financial decisions. If you’re struggling to prioritize savings and debt repayment, I urge you to start building an emergency fund as soon as possible. It’s a decision you won’t regret.
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