Do We Make Debt Repayment or Emergency Fund Top Up a Priority?

I’ve decided that I’m going to stop doing a monthly review of my debt repayment since, quite honestly, I feel they’re monotonous. Know that just because I stop writing about the same payments every month we are still working towards the goal. Instead I will update at important milestones like when we pay off our next loan, or may do a quarterly check-in instead.

These last two to three months seem to be one step forward and three steps back in every aspect of my life, debt repayment included. We’re still on track to have our next loan paid off in November but if we have another two months like we just did, it will be December or January so fingers crossed we have no more major unexpected, and expensive, events pop up.

I don’t know if it’s because I wrote it down, shared it with the world and made it a concrete goal, but paying off this loan by November, ideally my birthday (the 6th), is consuming me. I want this loan gone more than any other financial goal but I have to be honest in saying our ER fund has been hit, hard. So my heart and head are in different spots.

If I want this loan paid off by November I really do need to continue to throw as much money as we have towards it which means topping up our seriously depleted ER fund will have to wait for the most part. I can have the ER fund back to an acceptable level in 1-2 months but that means no real ”extra” debt payments.

Or I could put a sizable chunk of extra funds towards debt and slowly (like $100/month) build the ER fund back up at he same time….

Or I could live life on the edge with an ER fund sitting at a scarce $562.00 for four months, then beef it up big time when this next loan is done.

I really am torn about which route to go. In terms of replenishing the ER fund, my preference is to just replenish it in one to two months rather than slowly replenishing it but that also means either derailing payoff date or essentially living with no ER fund for upwards of four months (though I did go 28 years without any).

I also have to consider that though we may maintain a low ER fund (not saying I won’t pay it back first) I have to consider we will have additional funds coming in throughout these next four months intended for debt but that we could redirect in an emergency situation if needed.

With all this said I want your advice, do we keep on with debt repayment or build up ER fund again? What route?

Enjoy Plunged in Debt?


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  1. I hear ya on these birthday goal time frames. I have one as well, though I truthfully don’t know how close I will get. I keep a good sized emergency fund, but it might get tapped closer to the end to get me to my goals. I guess since you have such a large debt payment (how much is the minimums and how much is extra if an unexpected event occurs) you’re probably okay to cash flow any emergencies. That said, I like having cash in the bank.

    • Catherine says

      I also like cash in the bank but this loan is like a tick I want gone. Minimum payment is $1415 total (445 for this particular loan) and I like tp put $2,000-2,100/mo.

  2. That’s a tough one! I like the divide and conquer method and it’s what I used until I had my emergency fund where I wanted. I put $100 a week into my ER and then the rest to debt payments. Now that I have it to $5k I stopped completely and just do debt payments. There’s no interest made really on the savings account and there’s a lot of interest paid on the loans so I want to get rid of those to save the most in the long run! Good luck!

    • Catherine says

      I should add this loan is interest free…but I think I’m leaning more towards this even though it’s not my preference.

  3. I would knock out the emergency fund first, but I’m a big worrier. I’ve been in the situation, and I would rather have money to fall back on than eliminate debt a few months earlier.

  4. Kathy from CT says

    For me, I sleep better with a bigger emergency fund. I stopped worrying about the interest a few extra months would mean. In fact, I looked at it as buying peace of mind. That was the only way I could make peace with it. Again, that is just me…..someone else would be thinking I am an idiot for shelling out extra money unnecessarily. Tough decision….good luck.

  5. I am in dilemma. In my case, I think I would focus on debt repayment first before taking care of my emergency fund so that after paying it off, I can boost the saving rate of my emergency fund afterward. It really varies depending on the situation.

  6. For me I’d get my emergency fund replenished to an acceptable level for my needs, then start aggressively paying off debt. There is just too much that can happen, and then if you have to use something like a cc to pay for an emergency your back at square one.

  7. I hear ya. We are in the same situation. I want my car loan gone, even though it has the lowest interest rate, ASAP. Originally I thought we could pay if off in May. But then we had to push it back due to having to do a large home improvement. Now I am thinking it will be September at the earliest before it is finished. I could do August if we dipped even further into our e-fund.

    My solution was to replenish our e-fund back to about 3.5K (50% funded) and then go gung-ho on debt repayment. After this debt is paid we will split e-fund saving and debt repayment until we reach our target e-fund (normally around 6-7K).

  8. Hi, Catherine. It’s hard to give advice because, well, we are not you. But sometimes this can play on our side, because then we have a hard look at the issues at hand.
    I would ask you this: if you don’t have any ER fund, and something happens, what would you do? Get more debt, probably. So, even if you choose to pay your existing debt and not to fund your ER fund, if an emergency arrives you will end up you with no ER fund AND more debt. Does that make sense to you?
    Keep up the good work!

  9. If that loan is interest free, then I’d focus solely on replenishing the emergency fund. In fact there’s a lot I might do first before paying off an interest-free loan (unless it’s a friend or family loan–then you probably want to repay asap). You could make loan payments to a dedicated account in your name–where you earn interest–and then pay off the loan in one fell swoop from the dedicated fund you’ve built up before the loan interest rate becomes positive.

  10. The boring answer is that it really depends on your situation. Last year, when we were renting and kid-free, I would have said for sure debt repayment, and I was totally fine with a $1K emergency fund. Now that we’re homeowners and have a little one on the way, I wouldn’t feel comfortable with less than $10K in the bank should anything major happen that we have to repair.

    That being said, we are planning on taking on debt in the near future. We still have my husband’s $7K student loan, and we will both need new (to us) cars within a year. We’re saving up as much as we can, but we also have some major baby stuff to buy so it is a constant struggle of figuring out what to purchase.

  11. I’d probably split priorities and put some “extra” money toward both the EF and the loan.

  12. Since you have no access to credit, I would build up the emergency fund. There are too many things that could happen, although in Canada a trip to the ER might not be that bad. I know you want the debt gone but that’s my two cents.

  13. With the loan being interest free, the logical choice is to build up your savings first. HOWEVER, there is incredible power that comes from achieving a goal, and the importance of that can sometimes be forgotten. You set a deadline for this debt to be gone, so crush it!


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