Simple & Strategic Plan for Debt Repayment and Emergency Fund Savings

by · 2 comments

**UPDATE** This article was picked as an “Actionable Debt Reduction Plan” in the 195th Carnival of Debt Reduction!

“Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”  Romans 13:8

The Problem

In case you have been living in a van down by the river you should be fully aware of our troubled economy and the effect it is having on your personal finances.  Here are a few troubling statistics to mull over:

  • The Outstanding Public U.S. Debt as of 08 Apr 2009 at 04:15:26 PM GMT is:  $11,156,128,996,344.04
  • The estimated population of the United States is 305,964,296
  • Each citizen’s share of this debt is $36,462.19
  • The National Debt has continued to increase an average of $3.85 billion per day since September 28, 2007
  • About 43% of American families spend more than they earn each year
  • Average households carry some $8,000 in credit card debt
  • Personal bankruptcies have doubled in the past decade

Well…regardless of what got our country into this mess and regardless of what got you into your personal financial predicaments, now is the time to make the change!

The Solution

Here are five simple principles you need to adopt RIGHT NOW if you are serious about debt free living.

  • Stop spending irresponsibly
  • Budget your money
  • Start or accelerate your debt repayment schedule
  • Create an Emergency Fund with automatic deposits
  • Look to the Lord & His Word for the wisdom to get it all done right

Today we will focus on the topics of Debt Repayment & Emergency Fund Savings and show you how to strategically get started on both.

These two topics are the foundational building blocks of debt free living, so to begin down the road to successful personal finances we must pay great attention to immediate implementation of both philosophies.  Let’s start by defining the two for the purposes of this article:

  • Debt Repayment – a focused & strategic effort to eliminate your consumer debt (credit cards, auto loans, etc).
  • Emergency Fund Savings – deliberate & faithful contributions to a savings account that exists for unexpected financial situations.

There is a lot of debate as of late on how to repay your debt and how to contribute to your Emergency Fund.  Which brings us to the implementation portion of this article.

The Strategy

Fortunately, a lot of times the simple solutions are the best solutions.  That is indeed the case with today’s topic.  A lot of people try to make things more complicated than they need to be, so we are going to guide the ship back on course by this simple solution.

**Disclaimer:  being that one solution will never work for all the people all the time, this strategy is simple to customize to your situation.

To get started take the following steps:

  1. Determine how much you have to work with – figure out exactly how much you have available each month to put toward debt repayment & Emergency Fund contributions
  2. Automate the process as much as possible – use auto bill pay to pay down your consumer debt and automatic contributions to your Emergency Fund savings
  3. Employ the 75/25 rule – Contribute 75% of your available funds (which you calculated in step 1) toward your debt repayment and 25% toward your Emergency Fund (as mentioned above, if 75/25 isn’t the best ratio for you simply customize it to your situation)

In my experience, the best way to implement this strategy is by using an Capital One 360 Checking & Savings account to automate this process as much as possible.  Hopefully your bank gives you the same options…either way I HIGHLY recommend you open both a checking & savings account with Capital One 360.

If you are faithful to take small steps each day to improve your financial situation before you know it your Debt Free Adventure will become a Debt Free Life!



Betterment is one of my two favorite ways to earn interest on my savings! They have an awesome program for the Average Joe to save and invest simply and effectively. There are no minimum balance requirements and no transaction fees. Read my Betterment Review or open an account to get started earning now.

1 Pinyo

I like your approach. This simple strategy will work well for most people (although I would put 100% effort toward non-mortgage debt repayment).

2 DebtFREEk!

Applying 100% of all your extra resources to your non-mortgage debt repayment is an especially attractive option if you have faith that the Lord will provide your “Emergency Fund” should and emergency arise.

After all…the Lord made all things including man and money…so the only thing that needs strengthening is our faith!

Previous post:

Next post: