Debt Repayment High

Thanks to everyone who commented on my e-fund post the other day. I’m thinking it over and I’ll probably talk more about it in July, after the student loan is paid off [WOO!]

And speaking of which….

I’ve been thinking a lot about the emotions we have (or rather, of course, I have) around money. The satisfaction at looking at my net worth rising every month, the mild depression when my tiny retirement account loses a few dollars on a bad stock market day…. These two examples are opposites of each other not only in that one is positive and one is negative, one is strong and one is mild, but also in that one is pretty rational and the other is irrational (the satisfaction comes from being pleased with my behavior, the depression for no good reason at all since I know market movement in small sample sizes is just noise). But they are equally “present” emotions.

The strongest emotion I’ve had in the last few months around money has cropped up when a paycheck’s come in and I’ve been able to make a payment on my student loan, though. I really experience that — logging into the website, entering the amount, hitting “submit” and then, a few days later, seeing the new, lower balance after the payment has been made — as a kind of physical high. I get frustrated when a weekend intervenes and I have to wait two whole extra days to see the new balance; I want to jump up and down at various points in the process. It’s actually fun.

There are two possibilities here:

1) There’s something really really wrong with me

2) This is a pretty normal reaction to successfully doing something that’s difficult and satisfying. There’s a reason why people liken debt repayment to weight loss and running marathons!

While I’m not discounting #1 entirely <g>, I think #2 is more likely. As weird as it sounds, I think I’m going to actually miss making student loan payments. I still have to pay down a credit card after the loan is gone, so it’s not like I’ll never make a debt payment again. But I don’t think that will be quite as satisfying. And after that…well, will having money automatically deducted from my paycheck for retirement give me that thrill?

I guess I could start losing weight.

Do you get debt repayment high? Or, if you’re debt-free now, do you generate that feeling in other ways?

Emergency Fund Musings

My e-fund currently stands at a grand total of — wait for it — $51, after an automatic end-of-the month transfer from checking to savings.

Yup, that’ll get me through anything!

Meanwhile, I’ve been directing massive amounts of incoming cash at my student loan, because I was/am bound and determined to get it paid off by the end of this contract, almost a year to the day after I defended my dissertation. I could easily fund a $1000 e-fund at the end of this month (or could have done it anytime in the last few months) by simply delaying debt repayment, and since interest on the student loan is now down to about $13 a month, I don’t know, maybe I should do that. Damn it, that’s $13 that could go somewhere else, though, like, say, to an e-fund, so….

Here’s my reasoning:

1) My e-fund-like efforts in the past have always disappeared quickly; I’d get them built up to a few thousand dollars and then either be unemployed for a while (I was a freelancer) or spend the money on a few trips or credit card payments after I ate out too much or bought new clothes or whatever. I am committed to budgeting more responsibly now that I am, oh my God, 35, and not 22 (not that I should have been doing that when I was 22, but water under the bridge) but I’m still worried that if I put together an e-fund I’d be tempted to dip into it for less than emergency expenses, and meanwhile the remainder of the debt would still be sitting there. If I kill the debt first, however, it’s killed.

2) I’m single and have no children or, for that matter, pets. That is, other living beings are not relying on my steady income (and a good thing too.) So, if a serious, big-time emergency strikes (I get hit by a bus) I at least won’t be putting anyone else in danger.

3) Meanwhile, for a minor emergency, I have an ungodly amount of unused credit — over $30,000 available on the four major credit cards that I have open.

3.5) Also, since I don’t own a house, the number of minor emergencies that could come up are reduced (no random exploding boilers or whatever.) Pretty much it comes down to unexpected car repairs and unexpected medical bills.

4) I could also call on my parents — I would never do that for anything less than a true, serious emergency, and I wouldn’t be likely to at all. Like, say I needed a plane ticket for a funeral: I’d rather put it on the credit card and pay it back in pieces. If I do end up asking my parents for help, it’s more likely to be in the form of free housing, should my tenuous hold on an academic career finally slip away. However, at the end of the day, I could ask them for an interest-free loan and get it, if I really needed it for some reason.

5) There is basically no chance I’ll randomly lose my job during this coming year. I have a guarantee of 13 months of income, so while I do want to guard against being unemployed in the future, I don’t need to worry about it in the imminent way I might if I worked in a normal job.

So the upshot is that I’m afraid of my own past bad habits and I’m not that afraid of handling emergencies with the non-cash resources I do have. I want that debt gone though — because one thing I really am afraid of is potentially entering a period of unemployment (13 months from now) while still in debt.

All that said, I do think I should have a bigger e-fund. I’d like to aim for $1000 to start, then maybe gradually ramp it up to $3000. But I don’t think I’m going to make it a priority over other savings goals. I couldn’t possibly get it large enough to really live off for six months or a year, so there doesn’t seem much point in having a relatively huge one when instead I could be directing money towards other priorities. I’ll talk more about this in July when I have a better sense of what exactly I’m going to make every month, though. Until I get my first paycheck I only have a ballpark idea of what it’ll look like after taxes, insurance, retirement contributions, etc.

What are your thoughts on e-funds? I know most people are making it more of a priority than me so I’m afraid I’m overlooking something.