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Save Monthly

This is Rule 7 in my 10 Rules to Eliminate Debt and Change Your Life

At this stage in the 10 Rules, you are now spending less than you earn and living on a monthly bills and expenses budget. The last thing you need is a large expense to cause you to miss a monthly debt payment and wreck your progress.

I’m not talking about an emergency. We can use an emergency fund to cover the unexpected things life throws at us. I’m talking about expenses we should expect, but forget about. Things like Christmas, tuition payments, taxes due, etc.

Last year we were planning a small family vacation to Chicago. I used our tax return check to fund most of the trip. Then I remembered that our oldest daughter’s school tuition was due the same month, around $1,500.

The previous year I had just used the tax refund to pay for it. This time I had spent it and had no extra money to fund the expense. This meant I had to instead use the money I had been dedicating towards debt payoff to pay the bill.

That also meant one month longer until debt freedom.

Step One

After that slip up I decided that I wasn’t going to let a large expected expense derail me. The first step I took was to decide what dollar amount of expense I could not fund out of my normal monthly budget.

For us it was $1,500. Anything more than that would require saving in advance.

Your number will be different based on your income and discretionary spending.

Step Two

Step two was to open a SmartyPig account, which takes monthly automatic withdrawals from our checking account and sends them to subaccounts based around our goals. We have 2 subaccounts – European Vacation and Tuition.

You don’t have to use a special service to do this. Even a coffee can and cash will work. The great thing about an automated service is that you don’t have to do anything other than make sure the money is in your account on withdrawal day.

Simply take the expected expense and divide it by the number of months until you have to pay it. That is the amount you would set aside each month.

For example, if you want to prevent Christmas gifts from derailing your debt payoff plan, decide what you want to spend. Let’s say $1,000. We have roughly 8 months until the money is needed, so $1000/8 = $125.

This is what you should have taken out of your account automatically each month.

By breaking it down to the bare minimum monthly saving, we are reducing pressure on our overall budget and making the expense more manageable.

Thinking Long Term

As you may have suspected, this Rule has more than one purpose. In addition to making sure you aren’t demoralized by getting knocked off your debt payoff plan, this Rule also forces you to think long term about your finances.

If you had been living a life of spending more than you earn, accumulating more debt each month, and generally living paycheck to paycheck, thinking more than a month ahead could be a big step for you.

Achieving financial freedom is about controlling your money.

Think about it. When you are in debt you don’t control your money. You don’t control your paycheck. Numerous others have claims to your check. You must give them a portion of it each month.

Since I was 18 I have never controlled my paycheck. I am looking forward to that day when I’m truly debt free.

I’m going to frame that first paycheck, just like when you are a kid and you earn that first dollar.


10 Rules to Eliminate Your Debt and Change Your Life

1. Combine Incomes, Finances and Efforts 

2. Spend Less than You Earn

3. Make a Monthly Debt Budget and Live by It 

4Pay Off Debts Smallest to Largest, Regardless of Interest Rates

5. Make Big Changes for Big Results 

6. If You Don’t Need It, Sell It 

7. Save Monthly for Large, Anticipated Expenses

8. Set Aside Some Money for Fun

9. Pay Off Debts Before Investing 

10. The Goal of Work is Retirement