Debt, Savings, and the Balance Are Not One Size Fits All | I've Paid For This Twice Already... http://www.paidtwice.com/2009/01/12/debt-savings-and-the-balance-are-not-one-size-fits-all/#comment-74535 Suzanne Mon, 12 Jan 2009 23:59:16 +0000 http://www.paidtwice.com/2009/01/12/debt-savings-and-the-balance-are-not-one-size-fits-all/#comment-74535 You really hit the nail there--the psychology of money. I liked the previously mentioned post of creating a few emergency fund sub-categories. Putting some money into each might feel more purposeful and help with the mind over matter feeling you are fighting. If you find $150 to use in the budget and you decide that $50 goes to Emergency (A) needs, $50 goes to Emergency (B) needs, and $50 goes to student loan, it may not seem as hard. Contrast how you feel about using the $100 to make the EF increase to $1100 vs. the 100+ amount you would have been able to throw at your loan payment. I guess, I'm trying to say that seeing <i>only</i>$1,100 in the EF as the end result doesn't feel as psychologically satisfying as knowing that you reduced the oppressive debt by $100. With the breakdown approach you are paying yourself (peace of mind with increased EF + increased interest paid to you) and paying yourself (peace of mind with decreased debt + decrease of interest you are paying over time). Win-win. You really hit the nail there–the psychology of money.

I liked the previously mentioned post of creating a few emergency fund sub-categories. Putting some money into each might feel more purposeful and help with the mind over matter feeling you are fighting.

If you find $150 to use in the budget and you decide that $50 goes to Emergency (A) needs, $50 goes to Emergency (B) needs, and $50 goes to student loan, it may not seem as hard. Contrast how you feel about using the $100 to make the EF increase to $1100 vs. the 100+ amount you would have been able to throw at your loan payment. I guess, I’m trying to say that seeing only$1,100 in the EF as the end result doesn’t feel as psychologically satisfying as knowing that you reduced the oppressive debt by $100. With the breakdown approach you are paying yourself (peace of mind with increased EF + increased interest paid to you) and paying yourself (peace of mind with decreased debt + decrease of interest you are paying over time). Win-win.

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