I started this year on a mission, to become completely debt free by the end of 2012! In part one, part two and part three of this series, I made a yearly budget, created a plan to increase my income and made a plan to start selling all my stuff.
Now on to part four, pausing saving and investing. Hold on! Don’t start getting all worked up just yet. I still have a plan to save and invest, I’m just pausing it for this short period.
I know most financial bloggers and readers alike, share this opinion, just because you’re paying down debt doesn’t mean you should stop saving for emergencies or putting money towards retirement.
There are good arguments for both cases.
PAUSE saving and investing if…
- You have an emergency fund established
- Your debt payoff date is in the near future
- Your job doesn’t offer a matching retirement plan
These are the only reasons I’ve decided to pause my saving and investing to focus on repaying my car loan. Normally I’m constantly saving extra money towards a particular goal.
But I’m putting that on hold this year, and making this debt repayment project my main focus.
Emergency funds are very important and come in very handy, when it comes to getting and staying out of debt. They stop the cycle of charging emergencies, then paying off the loans or credit cards, charging, paying off…
CONTINUE saving and investing if…
- You don’t have enough saved in an emergency fund
- Your debt payoff debt is a ways off
- Your company offers a retirement matching savings plan
For the reasons listed above, it’s very important to balance your saving/investing with your debt repayment plans. If I didn’t have an emergency fund in place, it could negate all my hard work if I had something come up.
My plan to pay down debt faster is only going to take about 8-10 months. But if it was taking several years, I would continue saving and investing while paying off debt.
Taking advantage of any employers 401(k) retirement account match is a good idea too, since it’s like getting free money!
Why it works for me
For these reasons, I’ve decided to pause any major saving and investing plans. I will still be contributing to my Betterment Roth IRA account, but I’ve decreased the amount to $50 per month.
I have a full month of expenses saved up for emergencies, and my debt repayment date will be here before the end of the year. This is why pausing any saving and investing makes sense for me, right now.
Steps to pay down debt faster
My six part plan to pay my debt down faster includes:
- Part one – Cut excessive spending
- Part two – Increase income
- Part three – Sell stuff
- Part four – Pause saving and investing
- Part five – Bartering
- Part six – Use found money
In this series I want to really define and focus on each method, so I don’t blend them together and lose momentum.
With the combined efforts of part one, part two, part three and part four, I will be able to jump start my goal and become debt free even quicker than I originally calculated.
Do you think it’s better to save/invest while paying off debt, or wait?
I'm an ex-small business accountant who aims to help freelancers get out of debt and organize their life. And through the recently launched 
