What We’re Doing With Money Now That Student Loans Are Gone

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?

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About Lance Cothern

Lance Cothern, a Certified Public Accountant (CPA) licensed in the Commonwealth of Virginia, is the founder of Money Manifesto. You can read more about him here or connect with him on Facebook, Twitter, Google+ or Pinterest.


  1. That would be a very good news when you’re a student debt free! For me, I would save more for my retirement, find an investment and start a business.

  2. That sounds like an awesome plan, Lance! You guys are younger than we were when we started saving a lot so you have a huge advantage!

  3. Good stuff. One other thing I’d recommend if you don’t do it already is to save toward a time when you eventually will replace your car, so that you can minimize or altogether avoid a monthly payment.

    • We’ll definitely be doing that, but we may not have a car specific account. Anything above the 12 months will be general savings/investments that we could use for things like a new car.

  4. Sounds like you have come up with a solid plan. We also invest part of our emergency fund because we figure we won’t need the whole amount all at once. If you have six months worth, invest 1/2 and you still have 3 months before you need it. It is definitely the place for safe and conservative investing. No risk taking here! And you can never go wrong beefing up the retirement savings. Congrats on getting rid of the student loan burden.

  5. Really good plan and I think its a very smart move investing part of the emergency fund. I agree with saving for a car too as often needing a new one starts creeping up on us. Best to be prepared.

  6. So are you going to have 6 months of savings in a Roth IRA or is it a different investment vehicle? I really think 12 months of an emergency fund is a really important idea.

    I don’t know where you live but if you’re not super close to a large city, job replacements don’t come as easy. Even if you’re near a big city, job replacements may not pay as much as one is used to, at least temporarily. That’s why an emergency fund is so important to either act as full income replacement or as a buffer to help make under-employment work.

    Right now my husband and I are paying off my high-interest student loans but we’ll stop before paying off my sub-2% interest loans, being that those are less than the inflation rate and there’s not point in paying them off early! But in the meantime, we still have a 6-month emergency fund for him because his career is contract and it could end. He’s been laid off for 3 months before and luckily our expenses are so low that with unemployment, we didn’t even need to dip into savings for his expenses. But if both of us were to lose a job, we’d definitely have to dig into savings which is why ultimately, we’ll go for 12 months emergency fund too!

    • I’m going to have 6 months in cash and then 6 months in a regular brokerage investment account.

      I think it is super important to have the efund when you’re a contract worker. Those jobs are much less stable that an typical job. I also agree with your decision not to pay off the 2% fixed rate student loans. I’d pay them off over the full term of the loan.

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