Should we save while on a debt free journey?
This question has been a back and forth one for us since we started our debt free journey. There are many reasons why we decided NOT to save such as: increasing our debt payments, low savings rates and motivation.
Before we jump into these reasons, note that we decided to pull our emergency fund from savings as this is an important back up plan for our unexpected life events. Trust me when I say that “something” will come up while on your debt journey and this fund helps us not to create more debt.
In May 2018, we stopped all of our savings deductions except for the mandatory saving requirements set by the lending institutions for loans.
Here are our reasons why:
- Stopping these savings immediately grew our snowball payments giving us a massive increase in debt payments.
- The interest rates on savings accounts are terrible and we could not justify receiving 1% interest on savings but paying out 10% interest in debt.
- We set aside a small savings amount that we felt was good enough if an emergency were to arise. Therefore, we felt comfortable not saving towards a greater emergency fund at this time.
- Not saving makes us very uncomfortable. This discomfort motivates us to get rid of our debt quickly so that we can resume saving ASAP.
Our next step after debt freedom is to save 6 months worth of our monthly expenses. This money will be placed in a separate account from our day-to-day banking and would not be easily accessible or tied to any loans whatsoever.
What do you think about this topic? Do you save while paying debt? What are your reasons?