May 6, 2020

We built an emergency fund after paying off $80,000 of student loans


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  • My wife and I paid off her $80,000 of student loan debt in a little under three years from when she graduated.
  • Rather than spend the money we previously put toward debt on fun things we wanted, we used the extra cash to finish filling what is now our six-month emergency fund.
  • We fully stocked our $24,000 emergency fund in a few months due to our intense effort, and it has been a huge blessing, especially in the current environment.
  • Read more personal finance coverage.

An emergency fund has always been an essential part of my family’s financial plan. My wife and I don’t want to get stuck in a financial bind should a sizable unexpected expense pop up or a job loss reduce our income.

When my wife graduated from college with a nursing degree, she had over $80,000 of student loan debt. We wanted to pay it down aggressively, but we made sure to set aside a decent emergency fund first.

We decided to keep $10,000 in savings as we started our pay-off journey. This way, we could handle most financial surprises without digging ourselves deeper into debt.

With a lot of hustle, two well-paying professional jobs, and keeping our expenses to a minimum, we were able to pay off what my wife owed in under three years. Even though paying off my wife’s student loan debt was a considerable accomplishment, our finances weren’t in ideal shape. 

Building our emergency fund

We decided to build a full six-month emergency fund before we relaxed our tight grip on our expenses. That meant adding another $14,000 to our emergency fund. After three years of sacrifice, delaying gratification another few months to fill our emergency fund wasn’t a hard decision for us. 

While we were paying off my wife’s student loan debt, she ended up on short-term disability twice due to foot surgeries. Her short-term disability coverage through her work only paid a portion of her base salary, which resulted in a significant dip in our monthly income. 

Thankfully, we were spending much less than we earned to pay down her student loans. This meant we only had to put the aggressive debt pay-off on hold and we could still cover our other expenses. However, this opened our eyes to how fragile finances can be if one of us lost our job. 

After I graduated in 2009 into the great recession, I was very well aware that jobs should not be taken for granted. My wife had a similar issue when she graduated in 2011. It was difficult for her to find a nursing job without having prior experience despite having a four-year degree.

We didn’t want to put our future finances at risk. The decision to focus on building our emergency fund was easier because we knew it would only take a few more months of sacrifice to put ourselves in a strong financial position.

Delaying gratification to build our savings

Due to our decision to fill our emergency fund, we didn’t immediately get the new furniture or home upgrades we wanted. Instead, we used the massive monthly payments we had been making toward her student loan debt, often several thousand dollars per month, to add to our emergency fund. This brought us peace of mind. 

We did allow ourselves one luxury — an inexpensive cruise vacation — to celebrate our big win. After that, we delayed other major purchases until our emergency fund was complete. 

In retrospect, we haven’t had to dip into our emergency fund for any emergencies since we finished building it in 2014. Even so, we’re glad we have financial reserves during times like these. 



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