I think everyone goes through the same process. First, they decide to pay down the debt and see all the progress made in the first couple months from tracking expenses, cutting back, and not charging more. The momentum is awesome, the motivation is great, and everyone I know sits down with a pencil and paper and figures out how it will all be paid off months or years sooner than they thought.

At this point I want to say “No, it won’t” but don’t want to be a demotivator, plus they don’t believe it anyway (just like I didn’t).

Then everyone decides to use the cards as the emergency fund at first. I want to say “It doesn’t work that way” but you have to come to that conclusion yourself. It doesn’t make sense until you’ve had a setback and tapped the fund the first time and not borrowed any more to feel how that works and why it’s right to have the money in the bank even with outstanding debt. In spite of all the numbers, a lot of finance has nothing to do with “the math” including when to have a mini e-fund.

There are more strange things to come. Like how when you get rid of the debt somehow your income seems to go up faster than it did before. Or how once you get your Full Monte emergency fund in place, for some reason you almost never have to tap it. But nobody buys it from the guy that’s been there. You have to experience it to believe it.

Oh, and one more thing that can’t be explained but has to be experienced – when you get there it’s even better than you think.

It stands to reason though, that if you borrow money it was because you didn’t have any or enough. If you can put some away while you are paying off the money you owe, you more than likely will not have to borrow again.

A savings is a good idea. No matter how small, just start one. It doesn’t even have to be in a traditional savings account at a bank (although you are missing out on an interest rate if you have enough in savings.)

Mine is about $200.00 right now. My husband just went back to work a month ago, and we are catching up on being off work for almost 6 months. Yeah, 200 isn’t much, but that is 200 that will not be put on a credit card or borrowed in an emergency.

In reply to David, borrowing money to cover these emergencies would be totally counterproductive to the mentality of paying off debt, not to mention inefficient. Again, save yourself the stress.

Peace of mind is everything to me. And you have to do what brings you to that.

You do always have the option of borrowing to cover emergencies. Let that be your rainy day fund for now. Post-debt, your first $2,500 of savings can be the new rainy day fund.

I just found your blog recently. Way to go on your financial progress!

This is so great to see! The great part is that you have changed your relationship with your money, and your life will never be the same.

As you found out, the emergency fund is quite important. It helps you cover the unexpected bills, so that you can keep moving full steam ahead.

With the changed behavior patterns you are exhibiting it won’t be long before that debt is gone!

Great Job.

I have made a similar journey, so the can feel the excitement along with you.

-The Happy Rock

Here’s how I do it.

I take the same amount out each week as I have for years and see how much I can save of it. As I mentioned in my email by using a shopping list amonst other ideas I’ve cut my shopping budget in half rather than spending that money else where as I might have done before it now gets set aside in a jar. All of sudden instead of complaining how hard it is to keep our spending under control I’m motivated to see how much I can cut each week. As the savings grow so does my motivation.

I expect by the end of the month to have 3-4 hundreds euros set aside. Best part is I don’t feel like I’m scrimping and scraping by for a change I’m really enjoying not spending money.

There is a second and very important reason for saving rather than just debt reduction. It gets you in the habit of having money in the bank. Of saving of paying for things cash. Once you are debt free you run the risk of slipping back into old habits again if all you’ve done is debt reduction. The reason is that while you haven’t been running up debts you haven’t been developing the habit of setting money aside each month. It’s very easy to fall back into the temptation of spending again now that your free.

But if you’ve been saving at the same time as you are paying debt off as your payments you are ingraining new habits which will make it harder to slip back into old ways once you are debt free.

I have been debt free several times only to fall back into old habits, that’s why I keep telling my wife it’s not about paying debts off but living frugally. Getting debt free will happen naturally

Or as I like to say a dollar (euro) saved is less time spent working OT!

When growing up I always saw the credit card as the emergency fund to pay for stuff when the income ran out. Living below income seems like a wild idea that so many people simply don’t do. Tackling that debt seems to never happen because there is never enough money. The money is there but the management is not.

I’ve followed your blog for a few months now and you have made a lot of progress on paying down your debt. Good luck to you on getting your savings back up for those rainy days.