Saving my money creates options
Should you pay off debt or save? Ah, the age old question, and one I love to tackle. To be honest, I have changed my tune on this topic several times. For awhile I thought the best decision was always to pay off debt – then I realized that a lot of times it’s best to pay off debt and save.
While my opinions may change, one fact always remains the same… saving my money gives me options.
Emergency fund goal met, now what?
At this stage in the game, an Emergency Fund (EF) harboring two months expenses delivers us a capable level of comfort. Our August contribution made that goal reality, and with another milestone behind us, September arrived with a decision of its own – where should we begin funneling the freshly available $650 monthly EF contribution?
I immediately decided to bump our Next Auto Fund (NAF) from $350 to $500, but struggled with where to direct the remaining $500. For several weeks I rested in our decision to put it toward the 2nd mortgage (2M) but never felt super comfortable about it. Shortly before the September 2M payment was made, my mind was changed.
“The term ‘slush fund’ was originally a nautical term; the slush referred to the fat or grease that was obtained by boiling salted meat, the sale of which could then be used to provide the crew with special luxuries. The money obtained from this sale was placed into the so-called ‘slush-fund’.” source
Basically… A Slush Fund is a place to SAVE extra money for a future purpose. I like the sound of that.
Would contributing to a Slush Fund allow me to pay off my debt as fast as someone who saves a $1,000 EF then puts all their eggs in the basket of debt reduction? Maybe, maybe not. Mathematically debt reduction makes sense, until unexpected happenings deplete the small EF thus increasing the unintended likeliness of more financed debt. Anything is possible so why not give yourself options? You could always use extra savings to pay off debt in lump sum payments at a later date.
Long story short
In edition to the extra $300 we put toward the 2M and the extra $100 we put toward my Student Loan monthly, we created a Slush Fund for our extra $500 and will go forward from there. After all… saving my money gives me options.
The flexibility is what I’m after. I will most likely use the fund to pay off debt in lump sums, but am giving myself the option to put it elsewhere… if it is needed elsewhere.
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