How I paid off $13,000 in debt—and started an emergency fund

Paying off my debt and starting an emergency fund

It had been six years since college. I was living in a fun city, making progress in my career, and building a great relationship with my new boyfriend. The whole #adulting thing was going pretty well. But there was one problem—I was $13,000 in debt and had no idea how long it would take to get out of it. Here’s how I did.

Thinking beyond minimum payments

Don’t get me wrong, I knew I owed the money. And I made my minimum student loan and credit card payments on time each month—which is fine if that’s your only option. But I felt like I was just going through the motions, without understanding the consequences. I didn’t have a comprehensive view of my finances and where my money was going.

After a little encouragement from my budget-conscious boyfriend, John, I took a hard look at the numbers—and the interest that was adding up as I made only those minimum payments.

I took John’s recommendation and started using a budgeting app called YNAB, which helped me take stock of my expenses, including my student loan and credit card debt. It was eye-opening to see them all in one place.  That’s when I decided to take action. I went full snowball.

The snowball approach to paying off debt

Taking the snowball approach to paying off debt means I started by paying off my smallest debt. Then I would roll the money I was paying toward that debt into my next largest debt. It was a good way to gain momentum and a sense of accomplishment. Pretty much, I worked from smallest to largest with a couple exceptions.

To help me put more money toward my debt, I also cut costs. And there’s no magic trick here. I cut cable and got rid of a few subscriptions. I started planning my meals, shopping for the week, and eating out less. Basically, I used the same old budgeting tips we’ve all heard before—and they worked!

In less than two years I was debt free and switched gears to creating an emergency fund.



"I didn’t have a comprehensive view of my finances and where my money was going."



Creating an emergency fund—and achieving peace of mind

I made it my goal to create an emergency fund that would cover my expenses for three months. For me, that was about $5,000. I started searching online for savings accounts with the best interest rates. That’s when I decided to go with an online bank.

Something like a high-yield savings account or money market account works great for an emergency fund.

I was in the process of switching jobs and found myself with a little extra income, so I used that to kick-start my emergency fund. I directed a set amount of my paycheck into savings each week—so I never even had a chance to miss it.

It didn’t take long before I reached my $5,000 goal. And it’s a good thing I did! When a storm damaged my fence, I needed to repair it right away to keep my dogs safe. It cost about $1,800. So I was able to pay for the repairs and then work to build up my emergency fund again.

What I learned from paying off my debt

The experience of paying off debt and creating a budget changed how I view my finances forever. Now I have a save-then-spend mentality and I give every dollar a job—whether it’s going toward my emergency fund or another goal, like a European vacation. The best part of all is how empowered I feel.

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