At about this time every month I used to let you know how we were doing paying down my wife’s student loan debt. We’re very happy that the student loan beast was slain last month, but we didn’t announce what we’d be doing next in regards to our money.
Curious minds have sent me emails asking what the next move would be for us financially, so I decided I’d let you all in on our plans. I’d suggest that people who just got out of a massive amount of debt follow a similar plan for themselves, although the specific details might change based on your circumstances.
Time To Secure Our Financial Future
Now that our student loan debt is gone, we’re going to secure our future. We talked about working toward total debt freedom, but our only remaining debt is our two mortgages. We ultimately decided against locking our money up in our house by paying down our low fixed rate 30 year mortgages because it didn’t make a whole lot of financial sense. Mentally, it’d be nice to rid ourselves of our mortgages, but it is a poor financial move for us.
Increasing Retirement Contributions
The first thing we did was increase our retirement account contributions. We were saving for retirement while paying off the student loan debt, but not at the rate we would like to. Now, we’ve upped both of our retirement contribution percentages to 20% of our income before any employer matches. After the matches, we’ll be saving even more! This will be a great start to securing our future retirement.
Beefing Up Our Emergency Fund
Instead of becoming completely debt free, we’ve decided to beef up our emergency fund to 6 months of our expenses. This is a top priority for us and while we might loosen up the budget a little bit, we’ll still be aggressively saving for this goal much like we aggressively worked toward paying off the student loan debt.
Once we’re done with this step, we might relax our budget a bit more, but we’ll still have other big goals to accomplish with our money. We already had about 3 months worth of expenses in our emergency fund, but we feel beefing it up to 6 months in cash will really help us weather any potential financial storms that can be thrown our way. However, we realize something bigger might happen in the future, or a one – two punch of financial emergencies could throw us off our game.
So, rather than just stopping at a 6 month cash emergency fund, we’ve decided to up the game and have another 6 months of expenses, 12 total, in our emergency fund. The second 6 months of expenses won’t be like a traditional emergency fund, though. Instead of having this money sitting liquid in cash, slowly losing value to inflation, we’re going to invest the second 6 months in an investment account and allow it to grow!
Whether or not you call our 6 months of expenses in investments an emergency fund or not, it’s money we’re not planning on touching unless something pretty far out of the ordinary presents itself.
We Won’t Stop There
After we have 6 months of expenses in cash and 6 months of expenses in investments, we won’t start spending all of our money. I don’t think we could ever do that! Instead, we’ll continue investing, boosting our retirement savings and we’ll spend a bit more money on fun things we enjoy.
Of course, we’ll have to reexamine our situation once we reach our 12 month of expenses goal to see if there are other opportunities that we’d rather pursue.
What do you think of our post student loan debt goals? Would you follow a similar path once you paid off all of your non-mortgage debt?