Welcome back to the course! Congrats again on starting your journey towards becoming debt-free. In the last assignment, you learned how to Fill your Envelopes and how to record your real-life debt payments in Goodbudget. 

If you’ve already made your payment, that’s awesome! We hope that was an exciting experience for you. If you’re still gearing up to make your payment, that’s great too! Remember to lean on someone you trust if you’re feeling nervous. 

In today’s assignment, you’ll briefly look ahead at some possible money goals you might consider once you’re debt-free, as well as transition into the Reflection segment of the course. 

Before we get into it, here’s a recap of where you are on your debt journey.

You’ve made a lot of progress since the start of the course! What you’ve accomplished in such a short amount of time is no small feat, and we hope you feel energized and motivated to keep crushing your debt. 

And once your debt is paid off, consider using that snowball payment you no longer need for debt payoff to save up for other things that are important to you, like retirement, a vacation, or something else! If your emergency fund needs some bulking up (more on that below!), consider making that your primary goal.

But for the rest of the course, we’ll be taking a deeper dive into debt and its impact on our society and ourselves. Doing this reflective work will help you stick with your debt payoff plan, even when you might face uncertainty. We’ll also discuss some practical concepts, like why we should expect setbacks on our debt payoff journeys, and, in today’s reflection, why it’s important to consider our emergency fund when starting a debt payoff journey. We hope you’ll stick around! 

Reflection

In today’s reflection, we’ll be talking about the concept of ‘enough.’ Both the practical nature of making sure there’s enough (in the form of an emergency fund), but also the emotional aspects of feeling like you have enough.

Emergency funds: Having enough, practically speaking

Having an emergency fund available to you while you’re paying down debt is definitely recommended! But what’s not so clear is exactly how much that fund should be.

Karisa shared, 

“The debt plan I was following recommended folks set aside $1000 in an emergency fund in case you need it throughout your debt snowball payoff plan. I was surprised and scared because $1000 isn’t really that much in the area where I live. That wouldn’t even cover one month of expenses for me!”

Sounds like Karisa was concerned that she wouldn’t have enough to cover an emergency if one were to arise while she was paying down debt. And that’s a valid concern! (In a future assignment, we’ll talk about setbacks and the fact that we’ll all probably experience at least one during the course of our debt payoff journeys.) 

In order for Karisa to feel prepared for a potential setback, she decided to set aside a larger sum of money that was closer to one-month’s worth of expenses. 

When considering what your emergency fund might look like while you’re paying down debt, consider a couple of things: 

• How many dependents you have
• How stable your income is
• Whether you own a home or rent

While this isn’t an exhaustive list of all the things you might take into consideration for an emergency fund, it’s a good starting place. 

When Karisa was paying down debt, she was a single woman who didn’t have any dependents and rented an apartment. Because of that, she felt comfortable with an emergency fund that was closer to one-month’s worth of expenses. She might have considered setting aside more if she had kids or relatives that were relying on her financially, or if she owned a home. 

The feeling of having enough

Deciding what’s enough for day-to-day life or for potential emergencies is one thing, but actually feeling like you have enough is another. 

Even though Karisa decided to increase her emergency fund from the recommended $1000 to about one-month’s worth of expenses, she admitted that she still didn’t quite feel like that was enough. Emotionally she felt like she was still lacking. 

She said, “Nothing ever felt like enough. Before I started my debt journey, in my head, I was just going to keep stashing money aside forever. And I think that if you don’t have a clear-cut reason why you’re saving (or not saving), then you’ll never feel like you’ll have enough.” 

It sounds like what Karisa was getting at is that “saving” for the sake of saving was sort of a double-edged sword for her. Sure, it was good to have a cushion, but without knowing what that cushion was for, it was likely that she would have just kept setting money aside forever and kept worrying that the increasing pile of cash was still not enough to meet her undefined needs. Instead, having a specific money goal and a cap on her savings helped her understand what her savings were actually for and to be okay with what she had and feel like she had enough. Then she could use her extra income to do other things, like pay down debt.

This also points to our tendency as humans to hoard our resources. As Karisa mentioned, she might have continued saving — and worrying — forever. That desire to hoard and have as much as possible is related to the same set of values and attitudes that helped her get into debt in the first place. Because when we don’t feel like we have enough, it’s easy to keep saving, or more likely, buying things we don’t really need, like Karisa did. 

Sometimes, there really isn’t enough to go around. But if you’re like Karisa and do have some wiggle room, understanding what “enough” means to you can help you focus your resources toward your money goals.