Craig and Blaine, Money Crasher readers wrote in response to my post about Paying Off Debt and Saving For the Future At The Same Time.
We are on one income while my wife is in law school, and still manage to build up our emergency fund and make extra payments against our mortgage and save for retirement.
We aren’t very good about the whole budgeting bit; we just try not to spend more than we have to and keep ourselves too busy to buy random junk.
We’re a dual income family that subscribes to the second school of thought. We prioritize retirement and both max out ($15,500) every year. Then we prioritize college savings for our toddlers ($1,200/month), then the rainy day fund ($250) month, then whatever little is left after life’s necessities (i.e. mortgage, groceries, bills), we try to have some fun with it. We don’t carry credit card debt, with the exception of a loan we converted from home equity to get a 1.9% rate. We always pay the minimum and usually try to chip away at it with an extra $100/month even though we could earn more by investing that cash. That’s purely for psychological reasons – we don’t really want to carry the credit card debt for 7 years, even though it’s only at a 1.9% rate.
I am warming up to the idea that there are multiple ways to approach the debate over saving first or paying off debt first. My post was about the possibility of being able to do both if your financial situation is favorable to doing it. I think you are on the right track as long as you are consciously making an effort to make goals for saving AND paying off debt. You can’t save like crazy, but rack up crazy amounts of debt, and likewise, you can’t pay off all of your debt, and then never save a dime.