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Josh’s Debt Story (Part 3): Saving for Future Financial Goals


Josh’s Debt Story (Part 3): Saving for Future Financial Goals

The final way I was able to pay off my debt early might seem a little counter-intuitive. I began my debt story by saying you should make extra loan payments each month. This means using a portion of your disposable income to repay your loans early. But, I also set aside a percentage of my money for future financial goals.

I Made a Small Down Payment On My Car

While I borrowed $27,000 to pay for my car, I made a down payment of $3,000 to cover the various taxes and fees that are based on the sales price. I could have borrowed another $3,000 and took another few months to repay the balance. Instead, I used a small portion of my savings to cover the difference.

I could have paid more upfront, but, I would have pulled from my emergency fund and that could have been just as detrimental as borrowing too much money as I discussed in the second part of my debt story. Even people without debt have struggled financially if they don’t have any money in the bank to cover a large unexpected expense.

Make Savings Goals

Just as every company as 5-year and 10-year spending plans, you should make similar long-term goals when planning for large purchases. If you currently rent a studio apartment and plan to have a family in a few years you know you will need to buy a house that is big enough for your family. Since a house is a large purchase, you should start putting away money now to help cover the 20% down payment so you can qualify for your dream house.

If you suddenly decide you want to buy a house in the next three months but cannot afford the down payment required by the lender, you will need to buy a cheaper & smaller house or wait until you have enough money to buy a house in the same price range you cannot currently qualify for.

I Made Savings Goals

During college, I made savings goals. With my student loans, I deferred the interest for my loans and I was going to have the option to pay it back before it capitalized and rolled into the principal when my loans entered repayment status 6 months after graduation. This would have increased the size of my loan by several thousand dollars and I would have increased the monthly interest charge. So, I wrote a check and paid the deferred interest before this date.

I knew I was going to borrow money to buy a new car after paying off my student loans, so I set aside some extra money to help cover these costs and was able to get a smaller monthly payment because of the smaller amount I needed to borrow.

After paying off my $77,000 in student loans, I was debt-free for two years. During that time, I dedicated the extra money I previously spent paying back my student loans and a car loan for a down payment for our mortgage. When it came time to apply for the mortgage, my wife & I had the money in the bank to cover the 20% down payment requirement and we don’t have to pay private mortgage insurance (PMI) which is a fee you have to pay each month that adds to the cost of your mortgage until you have enough equity.

You Can Make Savings Goals

I’m sure you have future purchases you want to make as well and really don’t want another sky-high monthly payment right after you repay your current loans.

By saving enough money ahead of time, you can get a smaller and more manageable monthly payment because you borrow less money. Or, if you save up enough, you can pay for the entire purchase in cash and not have to borrow anything!

We paid cash for our most recent vehicle purchase even though we have a mortgage payment. It was a used vehicle that had a few more miles than we wanted, but, it’s one less monthly payment we are responsible for making and we have less financial stress as a result.

Your savings goals might be to save for summer vacation or Christmas instead of charging it to the credit card or taking a personal loan and paying interest for a month or two. If you are like me, borrowing money is about as exciting as visiting the dentist. I only do it because I have to and I try to take care of my teeth as much as possible to limit my trips and expenses.

By saving my money for a specific goal, I know how much I need to save & how many months it will take. When you make your own financial goals, you too will know how much you need to save to have enough by a certain date to make the purchase so you don’t have to borrow money and go back into debt.


I didn’t repay my loans early simply by making extra payments. I also had a plan for the future to reduce the amount I had to borrow. It also meant waiting to make large purchases and using what I already had for a little bit longer than desired. Just as Rome wasn’t built in a day, I didn’t become debt-free in a day. It took diligence to repay my past expenses and still save for the future so I could eventually escape the continual cycle of always making a monthly payment for past purchases.

Check out 

Josh’s Debt Story (Part 1):

Josh’s Debt Story (Part 2):

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