debt free divas, savvy brown, no buy month

Guest Post: Debt Free Divas answers the question “Pay Debt or Build Savings First?”

This is the classic chicken or the egg problem. Pay Debt or Build Savings? Which should one to do first? As we take on the No Buy Month challenge and reflect on spending habits – let’s consider this question. If you are in debt with limited (or no) savings, should you focus on building your savings or use the extra funds to pay off debt faster?

Let me tell you what I did.
debt fee divas, no buymonth, savvybrown
I’m a huge fan of Dave Ramsey. In his book, Total Money Makeover, he suggests that before focusing aggressively on dumping debt, one should save $1000 to create a starter emergency fund.

My husband wasn’t comfy with the $1000 suggestion. Looking at our situation, we had a number of properties in addition to our home and a business that was barely staying afloat.

We settled on $1000/property to satisfy my husband’s concern and then focused on non-mortgage debt.

With the starter fund in an online bank without check or debit card access (online transfers take 3 days), we chipped away at the $107,000 in consumer debt.

debt free divas, savvy brown, no buy monthIt took 7 years.

In that time, we experienced a number of unexpected situations.

  • Car troubles – I was sideswiped by a charter bus. Everyone was fine.
  • Someone stole the copper wires, after cutting the main power source, to our business property. Twice!
  • My daughter, Casey, was born at 23 weeks and after 2 hours passed from this life into Heaven. We had no reason to expect to fund a neonatal funeral as first time parents. As difficult as that experience was (and still is), the funeral home and cemetery required payment.

debt free divas, no buy month, savvy brownWithout any savings, each of those expenses would have ended up on credit cards. With the small savings, the financial sting of dealing with the unexpected was muted. We were able to focus on the issue and not pile a financial concern on top of an already tense or heart-wrenching situation.

The small savings allowed us to manage the unfortunate experiences without interrupting the momentum we were building by addressing our financial mess.

I’ve learned this – craziness in life happens whether you are working to fix your finances or not. Building a small savings fund first allows you to begin attacking debt with vigor sooner. It’s a great way to achieve a quick win and generate the momentum you’ll need to stay focused on the entire goal. When (not if, but when) the unexpected happens, you’ll have a better chance of staying committed to your debt dumping goal.

debt free divas, savvybrown, no buy month Additionally, don’t despair if you’re forced to use your small savings to avoid additional debt in a financial emergency. That’s why you have the fund – for emergencies.

Once you’re consumer debt free – work on building a larger 3-6 month emergency fund. Without consumer debt, this process should be much easier.

Bio: Toni Husbands is a financial coach and co-founder of the Debt Free Divas. They help men and women struggling with finances become debt free. Visit them online @


Photo Credits:

Vincent Tang/Dollarphotoclub



*There are affiliate link in this post.

Print Friendly

10 thoughts on “Guest Post: Debt Free Divas answers the question “Pay Debt or Build Savings First?”

  1. Savvy Brown Post author

    Beautiful post Toni. I’m so sorry for your loss! I speak from experience when I say that you don’t know until an emergency what that savings account is really for. Do you reccommend online savings over other form of savings accounts? Stocks, money market accounts, etc.?

  2. Rachel

    I came across this article on Pinterest. I liked this entry very much, but I was very saddened when I read about your unexpected situation. I just needed to comment to send you condolence for the loss of your baby.

  3. Toni @ Debt Free Divas

    Thank you Savvy – very much! It’s always a pleasure to collaborate. As for the savings – I went with (and love) online savings banks for building your emergency savings. I also don’t accept debit cards or checks so my only access is a 3 day wait for the transfer. A money market would be fine too. However, one should be familiar with any minimum requirements to avoid fees. The key is to keep your money in a liquid state that’s accessible if you need it, but not so available that it burns a whole in your pocket.

    Definitely avoid investments such as stocks. You don’t want to risk losing anything that will be needed in emergency situations.

  4. SavvyJames

    Great topic and good food for thought. I often advocate for doing both – servicing debt and saving/investing – at the same time. However, each situation is unique and there is no wrong approach. As long as an individual develops a comprehensive plan to deal with both, and is consistent is their efforts, they should be just fine.

  5. Haralee

    You are so right that life happens unexpectedly. I get angry when with the affordable health care act people still don’t buy health insurance because they are healthy. Yes you are healthy until you are not and if you haven’t set aside money why happens?

  6. Kathy @ SMART Living

    What great advice. Having a nest egg can be extremely valuable for more than just letting you deal with emergencies that WILL crop up, I think it also makes you feel more abundant and not so desperate. If we focus solely on how much debt we have we can get discouraged and feel like it is overwhelming us. A nest egg (even when we don’t touch it) makes us feel we can and will get out of that hole. Good for you for getting over your debt in 7 years, that is quite an accomplishment for sure. I never calculated how long it took my husband and I to do it, but the freedom that comes (and then especially when you are also mortgage free) is TREMENDOUS. It can be done and it’s important to keep letting others know that too. Thanks!

  7. Savvy Brown Post author

    @SavvyJames I agree. My emergency savings was pretty well depleted when my father passed away, and then I suddenly took ill. I was building it back up, but I needed to dip into other savings vehicles like stocks, bonds, borrowing from my life insurance and my 401K to makes ends meet. So I think we have to redefine what “savings” actually is.

Leave a Reply

Your email address will not be published. Required fields are marked *