Emergency Fund vs. Debt Repayment

This week marks a big accomplishment for me – I have reached my second emergency fund (EF) goal of $3k, after a year and a half of saving.

I had initially saved just $1k, which is thought to be the minimum EF when paying off debt. But, since my life feels very much in flux, I decided to modify my goal and aim for $3k.

My approach was simple: take 4% of my take-home pay in 2017-2018, bump it to 5% in 2019, and make a transfer from savings to checking each pay day (usually pre-scheduled to go through on pay day, so there were no excuses). Then, each time I reached $500, I sent a check to my high-yield savings account. I also added a bit of extra savings that I had thanks to my side hustles, until I reached $3k.

Here’s why I chose to save instead of solely paying down debt:

  1. It lessens the possibility of going into debt due to unplanned expenses outside of my budget and sinking funds, such as:
    • an emergency vet visit
    • a family emergency, which might entail a last-minute plane ticket
    • an unexpected car repair
    • emergency medical bill(s) (my health insurance is terrible)
  2. It makes me feel more secure – it is there if I need it, but sufficiently far away for me to not spend it unless necessary.
  3. It’s parked in a high interest savings account that garners me a 2.25% interest rate – 2018 was, in fact, the first year I received a 1099-INT, and the free money that grows from savings feels *good.*
  4. I’m already paying down debt. In fact, I regularly throw 35-45% of my take home pay towards my debt. But my debt level is so high (nearly twice my income) that it will be years before I pay it off, and the likelihood of *something* going wrong in that time is relatively high, I feel. Again, the EF makes me feel more secure. To live paycheck-to-paycheck for the next five years (estimated time to pay off my debt) seems unwise.
  5. I am a limited-term employee. My contract ends in June and in the worst case scenario that I cannot find another job before then, my emergency fund plus my paid PTO will see me through about 2 months.

This is my list, but there are lots of other resources out there about why you need an emergency fund (here, here, and here as well)  – and most would agree that you should save 3-6 months’ living expenses. But that would take a long time on a limited salary (several years), and so this (a goal of $3k) seemed a better option for me.

What’s next? There’s a part of me that wants to aim for $4k, but I think for at least the next couple of months, I’ll funnel my 5% into my sinking funds, build those up a little more (especially since my Very Expensive Feline needs some serious dental work), and then think about how I can add some additional debt repayment to the mix.

(all of the links here are articles I found helpful when researching what an emergency fund is and how I could build one)


November ’18 Net Worth

Total debt, November ’18: $93,822.20

Net worth, November ’18: -$20,297.20

Debt slayed, November ’18: $821.87

I continue to move slowly through this journey, but steadily. I feel pretty proud that this month, I managed to spend less than I earned. My spending was a whopping $25 less than my take-home pay. Within that, 44% went towards debt! This hasn’t been easy, but I feel very lucky to be making such strides.


September & October

I didn’t update in September for several reasons, including starting a new job. So here’s an update for the last two months:

Total debt, September ’18: $97,156.73

Net worth, September ’18: -$19,663.79

Total debt, October ’18: $94,644.07

Net worth, October ’18: -$21,166.70

My debt has dropped quite a bit, which is great! One reason is because I made a large(-ish) payment on my highest interest student loan in September. The second is because one of my other student loans inexplicably dropped by about $2k in October (I’m not sure why and don’t have much hope that it will stay this way).

One the less-positive side, my net worth also dropped substantially. Thanks to the stock market, my mutual funds are a mess. Here’s hoping it recovers soon.

Onwards and upwards…

August ’18 Net Worth

Total debt, August ’18: $98,262.32

Net worth, August ’18: -$19,495.70

Debt slayed, July ’18: $590.26

Not as good as last month for some reason, but still plugging along. It’s fairly remarkable as it is that I can pay this much debt on a $2,400/month take home pay (what is that, 20%?) Plus – I’m under (above?) negative $20k net worth, and if my calculations are correct, by this time next year,  I might actually break even and start building a positive net worth. Slowly, slowly.

July ’18 Net Worth

A bit late, but better now than never:

Total debt, July ’18: $98,852.58

Net worth, July ’18: -$21,257.85

Debt slayed, July ’18: $875.34

Not the greatest, but we’ll keep plugging along. A big milestone this month was opening a high-yield online savings account with Marcus. This is my first emergency fund and I’ll keep it growing – it took all year saving 4% of my income to reach my goal.

Next month I’ll reach another milestone: paying off my credit card debt.



In the middle of last year, I started keeping track of the current balance of my largest group of student loans. This will, I hope, give me some perspective as to where I stand:

Big student loan, June 2017: $63,146.61

Big student loan, January 2018: $60,879.44

Big student loan, July 2018: $58,247.74

Difference: -$4,898.87

This doesn’t sound like a lot, but it’s not bad considering in that time I made an international move and took a salary cut of about 35% (not by choice). Also in that time, I paid down my credit card debt to under $1,000 (it’ll be paid off this summer!) and started an emergency fund that’s nearly at $1,000.


This is the beginning of a long journey. It’s already a journey of 3+ years in which very little progressed. Suffice it to say, I made a lot of mistakes in a decade plus of graduate education. I adhered to the adage of “don’t pay for graduate school,” but what they really should have said was “don’t borrow during graduate school.” Loans piled on loans; I already had a huge number of loans from my undergraduate education.

A little bit of background by way of anonymity: I have a background in the humanities. See the above re; debt. I grew up poor and had very little financial literacy. I thought the way to get out was to get a good education, and despite multiple scholarships, I still emerged with substantial debt. Along the way I also made a lot of mistakes with credit cards.

This year, post-post-doc, is the first that I’ve gotten serious about my finances. Due to complicated reasons, I have a substantial amount of assets, but I cannot use them to pay down my debt. I am in a low-paying job and am seeking better employment; I also wrangle several side-hustles. I am lucky to have the support of a partner, but my debt is my own. I own it, and I am going to crush it.

I see this place as a way to track my progress, month-by-month. So, let’s begin.

Total debt, June ’18: $99,727.92

Net worth, June ’18: -$24,607.35

There it is, for all the world to see. This can be done.