A Story About Paying Off Debt and the Obstacles Along the Way


What Should We Do With Our "Extra" Money?

It's crazy to think about it, but at this time last year, we had nothing in our savings account.

Well. Full disclosure: we didn't have a savings account.

We just had our checking account, the balance of which perpetually oscillated between a couple thousand dollars and nearly zero, depending on which bill was due when, how many late fees we'd accidentally accrued, and what impulse buy seemed like a good idea in the moment.

In April, we finally started saving. Our initial goal was to set aside $1000 for emergencies, a stopgap that would allow us to diligently follow our debt repayment plan even if the famous Murphy were to take a poop on our lives. So we earmarked a hundred dollars or so per paycheck to the emergency fund. Much to our surprise, we met that goal within a few months.

Now our savings is growing. The pace of growth was slow at first, but it's picking up speed thanks to our new side hustles. Fortysomething and I have agreed that any money generated via side employment should go straight into the savings account. But once it's in there, what to do with it?

We have three options:

(1) Keep the cash in savings and watch it blossom. This option appeals to me. A lot. I love the motivation that comes from watching our balance balloon. Having substantial savings at hand would also make us feel more secure in the event that something more catastrophic - such as a job loss - were to transpire.

(2) Put that cash to work and throw it at debt. The idea here is to set aside all of our "extra" money and make a monster debt payment at the end of each month (in addition to the $1600 we already allocate for debt). The obvious benefit of this is that we'll be able to pay off our debt faster. 

(3) Establish sinking and holiday funds. We currently have neither, but with our car begging for new tires and my parents begging us to visit them at the holidays, we need both.

Option #2 was our original choice. We just want to get out of debt, and the more money we devote to that goal, the faster it will happen. Eventually, though, we realized that the sinking and holiday funds are more pressing priorities. We do need new tires - in reality, we're overdue - and we do want to spend time with family, something I don't want to put off even though it requires purchasing pricey plane tickets for holiday travel. Debt repayment is important. It is not, however, everything.

Now, BEHOLD: our Holiday Travel/Sinking Fund:
  • New tires: $1000 (could be less than this, but I'd rather over-estimate)
  • Annual fee for Thousand Trails (more about this in a future post): $500
  • Air travel for three: $900 (my parents will contribute to airline tickets)
  • Gifts for 8+ people: $200
  • Activities while on trip: $250
  • TOTAL: $2850
Once the savings account hits $3850 (emergency fund + sinking fund + holiday fund), we'll put any money in excess of that towards additional debt repayment.

I keep reminding myself that while we're paying off debt, we also have to live our lives.

We have to strive for happiness and stability.

We have to avoid blowing our threadbare tires on the highway.

This savings fund will help us achieve all of those things. After that? Watch out, debt. We're coming for you.

Disease Called Debt


  1. I think that is a great location for the side hustle funds. It has been a major plus to finally get my sinking fund categories down and saved (car insurance, maintenance, school fees, annual family travel, etc...). Then the EF is actually used for emergencies. ;)

    1. Thank you! It was hard to let go of the plan to just dump it all towards credit card debt, but having a carefully thought-out emergency fund and sinking/vacay fund will help ensure that we can continue paying that $1600/month without fail. And that DOES feel good.

  2. I think you have a solid plan here! Finding a balance along the way is so important, because like you said, you can't exactly pause life while you get out of debt.

    1. Thanks! It's been six months since we started this debt repayment journey, and we're still struggling to find that balance. But I think we're making some progress in that area.

  3. You started your journey not too long after we did. Sinking funds have also been one our biggest challenges. I think you have a great plan. Isn't it exciting to finally have a plan?!

    1. It definitely is! I love a good plan. :-)

  4. I think doing your sinking fund will help a lot with avoiding any new debt, so it's a smart choice.

    I am curious why investing wasn't on the list. That's what I tended to do with my extras.

    1. Thank you, Emily! Investing was on the unofficial list... It's definitely something we want and need to do (and are doing through 401K contributions), but right now the debt and the sinking funds seem more pressing. I can't wait to get through this debt repayment process so that we can apply our money towards the future rather than correcting our past mistakes!