Saving While In Debt

This is something I struggle with. There’s something almost oxymoronic about having money in a bank account when you owe so much money.

Our savings account is currently at $0.03, I kid you not. We’re just starting everything and have yet to make a deposit. September is our catch-up month before starting fresh in October with the debt management program. We will be contributing to savings but when our (minimum payment) debt load is about 23% of our monthly income I cannot justify the suggested 10% savings. It is simply not going to happen.

Here’s what I’m thinking:

5% I can do, but not monthly. Hubby and I are paid bi-weekly I will be using our ‘extra pay months’ to top up our menial monthly savings to an annual total of 5%. The ‘leftover’ money from the extra pays will be put into savings as well for irregular ‘life stuff’ such as oil changes, home repairs, vet appointments etc. Again, I have a hard time savings, say $50/month for ‘home repairs’ when I might only need $200 a year.  I would much rather just set money into a ‘life savings’ account to be used only when needed, if needed at all.

Which brings me to my second point, since this is money that will only be used, if needed, do I really need to distinguish between the 5% annual savings for rainy day/emergencies or just have one account for everything? I mean we’re not using the money unless needed so do I really need to separate the two? Should I take the 5% and invest it?

I’m having a hard time defining how I should be saving and where the money should go (TFSA? RRSP? Sav acct?) I just feel like, for now, we should work up to a few thousand in an account incase we have an emergency but maybe not commit the money into a RRSP/TFSA until we’re done with the DMP, at which point we will have more freedom in the budget to allocate to ‘proper savings’ (RRSP’s etc).

Any insight or tips about what works for you would be fantastic!

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3 thoughts on “Saving While In Debt

  1. I think that having a savings plan while getting out of debt is the key to success! What woulf happen if an emergency arose and you did not have savings? It would end up on a credit card and counteract all the progress that you have made!

  2. While I was paying off my debt I kept very little in savings, but looking back on it, this was a very bad idea. I really rolled the dice and just hoped that nothing bad would happen….I was lucky that nothing major occurred before I had my emergency fund in place, but I also don’t own a home and don’t have any children. So what I’m saying is: don’t do what I did! Having about a month’s worth of expenses in the bank is really helpful when it comes to paying for unexpected expenses.

    BTW – I love your blog design! So pretty 🙂

    • Thanks 🙂 I understand savings is important I’m just wondering how to separate them right now, Emergency vs Life vs Longterm…it’s a lot to consider! We’re also in a spot of ‘I hope nothing bad happens’ which makes me feel uneasy. Next month we’ll start with savings/breathing room.

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