Becoming Debt Free in 2009

December 15, 2008

My Pay Vs. Save Plan

Filed under: Budget,Debt,Goals,Journey to Debt Freedom — ambercouric @ 9:48 am
Tags: , ,

A few days ago I was wondering if I should save more or pay back debt.  After many discussions with my husband and hours using financial calculators, I think I have come up with the plan for us.

I read about this in the comments of someone’s blog but unfortunately I don’t remember where.  The concept is simple and it was actually like a “I should have had a V8” moment when I read it.  It fits in perfectly with our 2009 goals.

So here is the plan.  We will pay the minimums on both the car and the credit card and put the snowball amount in a savings account and when we have saved enough to pay off either the car or credit card we will pay it in one lump sum.   Then we will save enough to pay off the last debt.  The total interest we pay each month is about $75 so we will end up paying a little extra in interest but I will feel better about having the money on hand for a few months.

Here is how we are working the savings accounts.  We have 3 accounts.  One has our long term savings (about 3 months worth).   This is our security blanket and is NEVER used.  The second has $500 in it for whatever comes up (this is what we refer to as our EF).  The third account has money that we pay yearly bills (camps, insurance, etc.).  We will open a fourth account to use as our debt savings account.

I can’t wait to open up my debt savings account.  By December 31, 2009 – I WILL BE DEBT FREE.



  1. Great idea! I wish you all success in your quest to be debt free by next Dec.!

    We took an approach with the debt we incurred when Hubby lost his job that was differrent. We felt it was of most importance to save–so that was our priority, then the debt. Now that we’ve managed to buy a place that will become our home someday–we are switching the order. We’re not debt free at the moment but we do own a home with no mortgage–now to get rid of the unsecured debt too. 🙂 Always something.

    Comment by pokeberry mary — December 15, 2008 @ 10:27 am

  2. Sounds great. Good luck implementing this plan!

    Comment by frugal dreamer — December 15, 2008 @ 10:33 am

  3. That is how I paid off my car early and similar to how I paid off my credit cards. It gives you flexibility, if you need the cash for something else then you have it. I put mine in an online savings account to earn a little interest, unfortunately the way rates are right now you won’t get much. Good luck with your goals.

    Comment by Miss M — December 15, 2008 @ 11:41 am

  4. Sounds like a good plan! You’re enthusiastic about it, and that’s 1/2 the battle. Good Luck!

    Comment by Money Minder — December 15, 2008 @ 1:10 pm

  5. That sounds like an amazing plan! Good luck – I look forward to hearing about the journey!!!

    Comment by jpkittie — December 15, 2008 @ 1:38 pm

  6. That is a great idea! Because, it would be nice to know you have the money if something came up. As long as you don’t touch the account! lol!

    Glad to hear you are starting off the new year with your goal in mind! Happy HolidayS!

    Comment by money funk — December 15, 2008 @ 5:28 pm

  7. I thought I was the only one who had multiple accounts for different purposes! I’m not sure whether your plan is the most cost effective, especially if the interest on your debts are more than your savings, but in this uncertain economy, having another “cushion” is not a bad idea at all. Excellent job!

    Comment by shtinkykat — December 15, 2008 @ 11:21 pm

  8. Lol, I JUST told my husband last night my idea of opening a bunch of online savings accounts and nicknaming them for different purposes. He thought I was crazy, maybe I should tell him about you to convince him that I’m NOT!

    Comment by MakingUpForPastMistakes — December 16, 2008 @ 3:02 pm

  9. I actually just decided to do something similar myself. I want to pay down my debt, but am worried about the economy and how my company is doing. I decided to put the money in my efund for now and if I need it, it’s there. If I don’t need it, I can always use it finish paying off my debt on the schedule I set. It’ll cost a little more in interest, but the peace of mind is worth it.

    Comment by Slinky — December 16, 2008 @ 3:09 pm

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