HomeDebtBeat up debt, but save too

Beat up debt, but save too

My boy Eric hooked me up with a guest post today. He has a finance degree from the University of Colorado and an MBA from the University of Denver. He is currently a senior treasury analyst at a Fortune 500 company. He blogs about personal finance at Narrow Bridge and the Middle East at The Israel Situation.

Kicked in the face

It feels really good to kick debt in the face. In the last four years, I have bought a brand new, $17,000 car and taken on about $40,000 in student loans working on my MBA. Of the $57,000 in debt, less than $14,000 remains. I have a plan to be paid off completely in less than two years. I have managed to live below my means and kick debt in the face. However, beating the hell out of debt is only one part of the personal finance puzzle. It is also important to keep track of your finances and build up a safety net while paying down your debt. The two main savings methods that I am employing are investing in cash savings and investing in my retirement, but I had not been focusing on both of those as much as I should have until recently.

I have felt great about paying off my debt so quickly. Paying off a $90,000 MBA within two years of graduating is something anyone should be proud of, but I recently checked in on my savings account and realized I only have enough cash on hand to live for about 2 months, not the 3-4 that I should have saved. I am on track with my retirement savings, but that can always use a increase as well. Because of this, I have developed a two prong strategy to both kick debt in the face and kick yourself in the butt to start saving more.

Part I: Kicking Debt in the Face

You have probably heard of the debt snowball at some point if you are a regular on the personal finance blog circuit. If not, here is the low-down: Pay the minimum on all of your debts except for your highest interest debt, where you put every dollar you can. This is scientifically the fastest way to pay down your debt.

Part II: Kicking Yourself in the Butt

There is no big secret way to save money, you just have to set a plan and follow it. Sites like and banking sites like SmartyPig can help you track your savings goals. You can also set up a separate savings account at your bank if you want a little extra barrier between your savings goal and your spending accounts.

The smartest way to save your money is to not have to think about saving it in the first place. The best way I know of to do this is to set up your direct deposit from work to deposit your paycheck into two accounts. A certain amount of money is designated to go to the savings account and the remainder goes into your checking account. Keep your savings account deposit going as long as you have to in order to reach your savings goal.

Increasing your retirement savings is also an easy, automated process. Most employers let you take money directly out of your paycheck to be deposited into a 401(k), Roth 401(k), or IRA account. Every time I get a raise, I increase my contribution to my retirement accounts by 1%. If you are not taking advantage of a 401(k) match from your employer, you are giving up free money! Set that contribution level right now. If you are already contributing to your retirement accounts, just increase your level by a percent or two to keep building your retirement accounts. If you are worried about locking the money away, try an automated investing plan at a brokerage that allows you to sell and withdraw your funds whenever you want without tax implications.

Whatever you do, just make sure you are saving for emergencies and your future, and while you are at it, make sure you are paying off your debt too.

Questions: How did you decide how much to save vs use to pay down debt? Do you use the automated saving methods above? Why is Ninja so freakin’ sexy?

Editors Note: My only beef with Eric is that he likes to Kick debt in the face, where I prefer the punching method. And yes, I added that last question, I’m pathetic.



  1. I’m so guilty of this. I’ll fixate on something so intently that I’ll forget about other stuff.

    In the course of layoffs (thankfully I wasn’t impacted), I realized just how little “liquid” emergency fund I had. I had savings, but they weren’t easily accessible without penalties and the like.

    I’m rooting for you to pay off that last bit of debt quickly.

    • Thanks for the support. I am so close, yet so far, to being 100% debt free. That is until I buy a house and it starts over again.

  2. Great guest post and great new site layout! We decided how much to save based on annual goals we set. We know how much growth we want so we plan accordingly. We use Mint and an online savings bank. The money is transferred into our savings and since it is online we can’t touch it right away.

    I can so relate to this guest post. After having our surprising second child (we thought we were only having one…surprise twins) we went on a mission to pay off as much of our debt as possible. We sold my car, kept hubby’s truck (paid it off), and paid all our medical expenses right away…note to anyone thinking a PPO is the way to go, it’s not when you have maternity expenses. We also paid off our small cc balances (>$2K).

    While all the time we were hoping and praying nothing major would happen so we didn’t need much liquid savings. Well guess what, as soon as we paid everything off, my company lost a major contract and I was laid off of work. That is when reality hit…we need to focus on our savings in addition to paying debt.

    That tough lesson but I’m glad we learned the lesson early in life!

    • I am in the camp that we should all have a minimum of 3 months expenses on hand at all times. That way you are not stuck when you get blindsided with a layoff or unexpected expense.

  3. I have allocated the most to debt repayment right now with a small percentage to saving. Once the debt is paid down I will boost the saving fund.

  4. I only had enough in my savings account to cover one month of expenses while I aggressively paid down my debt. My reasoning was that I did not have a whole lot of debt to pay off (only took 5 months) and that if I lost my job I could always go back to my old standby of waiting tables and bartending for quick cash. That was comfortable for me but definitely would not be ok for others i.e. my fiance who has to have at least $20,000 to be able to breathe.

    • I am no quite like your finance. I like to have about 3 months expenses on hand at all times just in case. I also have stocks I could sell if I had to, but I would rather keep a cash cushion.

  5. We made the slightly risky decision a few months ago to use our 4 month emergency fund to pay off our last consumer debt – hubby’s car loan. Now we only have the mortgage left and have the emergency fund back up to about 2 months of expenses. I think it is a matter of how much risk you are willing to sleep with. We knew that if something popped up, we could use the rest of our fun money, vacation fund, sell stocks, or even take out the cash from our Roth IRA or 401k…that’s a lot of backup, so we felt the risk was minimal.

    Good luck with your debt payoff!!!

  6. I have been saving $500 a month for about six months now, to increase my $10k buffer to $20k. In reality, do I financially need that big of a buffer with a household income of only $75k? No, not really. But I continue to work towards that goal for peace of mind.

    I have made good progress by using the automatic savings plan through an AMEX high yield savings account. It withdrawals $250 on the 1st / 15th of every month, so the process has been relatively painless.

    Great work on the MBA by the way. If you have the ability to respond (since this isn’t technically your blog), could you tell me how much do you weigh a school’s reputation vs. its costs? My undergrad alma mater has a great business program, is super cheap, and has the accreditation of the AACSB, but their reputation is relatively unknown and their admission standards are fairly low.

    Would you consider a school like the one I have described?

    • Great work on the savings. Automated savings are the way to go and you are taking full advantage, that is something to be proud of.

      I think reputation is very important depending on what your goals are. If you want to stay in the region, a smaller school is likely fine. I went to a well known MBA program in the Denver area, but that would not do me a lot of good in California or New York. Don’t spend a lot for an unknown for sure. Consider the cost against your ultimate goals. I would spend more to go to a stellar school, but what is right for me might not be right for you.

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