Coming in under budget is an exciting feeling. It’s easy to start looking for ways to spend that money. In my case, I couldn’t wait to start funneling that extra money into our debt payments. But in this step Trent points out the importance of setting up an emergency fund. The size of the ideal emergency fund is what overwhelms me. We dip into our general savings at least a few times a year for things like household repairs and medical costs that exceed what we had budgeted for. However, I know that ideally we should have six months to a year’s salary set aside. That seems like more money than we could ever save. A year’s salary is also two thirds of what we own in student loan debt. So do I save for an emergency or start paying down debt? I guess the solution would be to do both. We already have a small emergency fund of between two and three months salary in it. I know it should be larger but I just can’t wait to start paying down that debt. So any time we get a windfall, my plan to divide it between paying off debt and filling up the emergency fund. The same goes for when we come in under budget. Onward and upward toward this goal of paying down debt and saving for those future dreams, a dollar or two at a time.
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