This Reader Story comes from Madeline Roche, who blogs at Ballingonabudget.org.
Some reader stories contain general advice; others are examples of how a GRS reader achieved financial success or failure. These stories feature folks with all levels of financial maturity and income.
Over the past three months, my savings account has been in flux. I was faced with some serious car maintenance duties and I made a lump-sum payment for an online certification program. Although fixing my car and going back to school are both good investments, the past three months have been financially painful to say the least. Fortunately, I had student loan payments. Yes, you heard me right. I was thankful for having my student loan payments.
After graduating from college, I made it a priority to fill up an emergency account, save enough to buy a car outright and put the rest of my paychecks toward my student loans. I figured that, while I had the cash, I should spend it on something worthwhile. More importantly, I learned how to live off of much less than I'm making.
My savings account has never been huge, but I figure being debt-free is more worthwhile than having a large sum of money sitting in my bank. When I made the decision to go back to school last month, I had to look at my budget and figure out how to make it work. Ultimately, I decided to pay out of pocket for some of it and take out a small loan from a close mentor. The part that I paid out of pocket, however, whammed my savings pretty hard.
So when the serious issues with my car presented themselves — first in the form of brakes, then in the form of a master cylinder, then in the form of a catalytic converter — I became more and more flustered. I hadn't budgeted $1,700 to fix a car that cost me just twice that. Thinking about paying all that made me sick to my stomach. It wasn't a sum of cash I had laying around and I didn't qualify this as an emergency, so I didn't consider using mine. So what was I left to do? I could decrease my already very limited spending, or I could cash in the small amount of stock I own…but I didn't need to do either!
I had another form of liquid cash: my generous student loan payments. I cut the amount I put toward my student loans for 3 months and allocated that money for my car and school. I wouldn't stop paying my loans, but just decrease the amount I put toward them to meet the required payments. Yes, I will pay slightly more in interest by extending my loan payment plan by three months (about $130 to be exact), but I've been paying aggressively for this very event: to be able to slow down if need be.
Paying off student loans and living life frugally has its challenges: I drive a used car that requires serious upkeep, I don't take expensive vacations and I shop mostly at thrift stores. But I've become accustomed to living on substantially less money to afford myself the luxury of having extra cash if times got hard. By scaling my student loan payments back by $400 a month, I have a way to finance fixing my car and further my career without dramatically changing my lifestyle. Student loans, as frustrating as they can be, can be a blessing in disguise.