Monday, July 9, 2012

My other emergency fund is debt pre-payment

I feel like it's been all debt reduction all the time around here, with relatively little in the way of frugality. I'm told I have a one-track mind and my student loans are where my mind has been for most of the year. Until I buckle down and dig up some spending numbers for the past few months, you can assume I've been making some mistakes here and there but otherwise sticking to my Mustachian roots. I'm guesstimating spending of $100/mo that I could pare down, in combined personal and joint spending, if I kept a closer eye and a tighter reign on things.

When I type out numbers like that it's a big motivation to get back to basics and pore over my Mint account. But that will come in the weeks ahead.

Since I've gotten down to one student loan, early payoff has been niggling in my brain. When I think of logging into my ING account I imagine scrounging up another few hundred dollars and sending in another payment. When I'm looking at my Google calendar, I'm checking when my next payday is. On my recent vacation to visit my mom, she dug up a stack of Series EE federal government savings bonds, which apparently I've had my whole life, and which (of course!) I'll be using to accelerate my prepayment. I think about them a lot.

Occasionally I'll think about my emergency fund, or lack thereof. I think almost everyone is doing the right thing when they save 3-6 months of living expenses in case of emergency. But I also think that in my case, an emergency fund of approximately zero is the best course of action. Being a two-income household, where we could scrape by on one of our salaries if we absolutely had to, is pretty luxurious. And I may be brash being a relative kid and all, but I'm not so set in my ways that I couldn't find work — any work — if I had to in a hurry. Not to mention that "safety" is overrated anyway.

There's one more ace I have up my sleeve. (On that note, I have found that the more I live by Mustachian principles, the more aces I find hiding up there.) Remember that whole thing about advancing your student loan due date a few months back? The short of it is that when you made a pre-payment, you could choose whether to keep your next due date the same (which would shorten the time period of the loan), or push it out a number of months proportional to the size of the pre-payment (which would buy you time in case you needed it).

Well, as best I can tell that's not an option anymore. I made three payments last month and I wasn't prompted to "advance my due date" once: it advanced the due date for me. That's all well and good. It's not going to make much difference for me.

Check out where it leaves me:
No payment due until next year
No payment due for two years
No payment due for three years
 My June 2012 payments of $6,800 mean that I don't have to make a single payment on my loans until May of 2015. The most likely scenario is that I lose my job and am unemployed for a number of months. It's a nice safety cushion in case I need it.

I like it better than six months of expenses in a savings account, personally.


  1. Keep up the good work!

  2. $6,800 in June!! Now that is kicking some major ass. You keep the pedal to the metal and you'll never regret this accomplishment.

    Love the blog btw. I've read every post and check back every week.

    1. Thanks! I'm preparing for another big payment. More updates soon.

  3. Ventured onto your blog from MMM. Just spent the last few days reading your archive from the beginning and I'm now up to date. Just wanted to say 'keep at it!' and ask the following questions:

    1. How's the cycling to work going? Are you doing it EVERY day now?
    2. How is the grocery and restaurant budget working for you and the GF?
    3. Any no-spend months yet?
    4. Are you still making small overpayments on the mortgage?

    1. Awesome, thanks. You know, I was having a hard time thinking of something to write about, so I think I'm going to cheat a little and answer your questions in my next post. :)