Life After Debt: What’s Next?

August 22, 2013
National Cupcake Day

On Tuesday, I wrote a post explaining what life has been like without debt. What I didn’t explain is how guilty I have felt about making even the smallest of purchases this summer. For example, I received a little bit of money for my birthday and decided to buy some new clothes with it. After finding a few great pieces (which I now wear all the time), I spent all of the money ($100) plus another $40 of my own. As soon as I made the purchase, I felt like I shouldn’t have. Why? Because, like I explained earlier this week, I often feel like most purchases are going to overextend my budget. However, I’ve also had this gut instinct telling me to save, not spend.

You should all know by now how much I trust my gut instincts. The first gut feeling I can remember having is the one that told me I was close to being maxed out, which I ignored. Since then, I’ve trusted all of them – from the one that told me to move to Toronto, to the one that told me to move back, and even the one that told me I needed to get sober. I had a really expensive summer, filled with weddings, concerts, etc. so my main goal was just to get through it without going into any debt. But I’ve known all along that I would need to get serious about saving in the fall – and that season is fast approaching.

Last week on my Facebook page, Jordann said:

I’m very curious to know what your next goals are, how you decided on them, and what your timelines are. I’d also be very interested in knowing how you are approaching investing.

For anyone else who is also curious, here are my goals for the rest of 2013:

Emergency Fund: $2,000

By the end of this month, I’ll have a measly $2,000 in my Emergency Fund. I say “measly” because my ultimate goal is to have $10,000 in there – but that’s a goal I’ve decided to put on hold until next year, or until I complete two of the other three savings goals listed below (Regular Savings + Travel).

Regular Savings: $1,000

One thing I’ve been thinking about a lot is having a regular savings account as well as an Emergency Fund. An Emergency Fund is meant for exactly that – emergencies. But I’d like to have access to a little bit of savings at all times too, for any unexpected non-emergency expenses that may come up. I’m going to save $250/month from September through December to make that happen.

Travel: $1,000

Much like how I want to have a little bit of regular savings readily available, I also want to set aside some money dedicated for future travel. Travel could include a roundtrip home to Victoria ($134) or a flight to somewhere new. I just want to have a little bit of money on hand at all times, in case the opportunity to travel comes up. I’m going to put $250/month aside for this, for the rest of the year.

Retirement: 10% of Take Home Pay

I feel sick admitting this but I’ve contributed a big fat $0 to my RRSPs this year. Before, I was contributing $100-200/month on top of the $300+ I was putting into the pension I had at my last job. When I realized how close I was to being debt-free, I stopped saving and focused on paying off the last of what I owed. Now, it’s time to get serious about saving for my future. I had a hard time coming up with the magic number of how much I could/should save, so I’ve decided to start with 10% of my take home pay; that means I’ll be contributing at least $330/month to my RRSPs.

As for investing, that’s something I’ve been thinking about more than anything else lately. And I don’t mean to leave you guys hanging, but I have a little announcement to make next week about that!

For now, that’s that! It seems like a bunch of small goals, but I just want to finish this year and feel like I have my first little cushion of savings and know that I’m saving for my future. If I stick to this, I’ll be saving 25% of my take home pay each month, which seems reasonable to me. Once I have $1,000 in both my Regular Savings + Travel accounts, I’ll start aggressively boosting my Emergency Fund up to my $10,000 goal. I’ll also take some time at the end of December to see where I’m at and reconsider my goals for 2014. For the rest of this month, however, I’m going to enjoy the flexibility of what’s left in my summer budget – that means having my (cup)cake and eating it too!

What do you think of my goals for the rest of 2013?

  • Jordann @ My Alternate Life August 22, 2013 at 4:49 am

    Awesome to get some insight on what you’re planning to accomplish now that your debt is paid off! I definitely think you’re on the right track with your savings goals. I have a bunch of little similar goals that I need to accomplish immediately after debt freedom, sort of like house keeping stuff that I’ve been putting off.

    Plus all of those goals are nice and little so you should have no problem checking them all off!

    • Cait August 22, 2013 at 1:21 pm

      You know me – gotta be realistic! It’ll feel nice to accomplish these small goals first, then move onto the big stuff! Thanks again for the question, Jordann.

  • Elizabeth August 22, 2013 at 5:16 am

    I am kind of wondering why you chose $10,000 as the amount of money that you want in your emergency fund. I’ve heard a lot of different ways to calculate it and was wondering which one you chose. My expenses are look to be not far off yours and my emergency fund is just over $5,000, that said I am a nurse so I have some pretty good job security.

    • Cait August 22, 2013 at 1:26 pm

      I’d like to have $10K in savings for 2 reasons: 1) I want to have 6 month’s worth of expenses saved and I calculated that to be about about $10K (according to my new September budget minus any savings). And 2) it’s seriously just a weird dream of mine to have that much money in an account. I can’t even imagine seeing that amount of money in the bank!

  • Akshara Vivekananthan August 22, 2013 at 6:20 am

    You’re really an inspiration. Even with this economy, I feel that it’s rare to see a person taking charge and being wise about their spendings/savings. I’m a recent college graduate, and reading your blog really puts me in check. I think your goals for the rest of 2013 are amazing, and I can’t wait to read further about your progress.


    • Cait August 22, 2013 at 1:26 pm

      Thank you so much, Akshara! Appreciate the comment :)

  • Steve August 22, 2013 at 9:25 am

    Those sound like very realistic and achievable savings goals. I think it sounds like a great plan and you can reassess it in December to see if you need to tweak certain amounts.

    Thanks for the update, it’s always nice to see how others are prepping their finances after debt!

    • Cait August 22, 2013 at 1:27 pm

      No problem, thanks for commenting!

  • Liquid August 22, 2013 at 9:35 am

    Great goals :) I haven’t contributed to my RRSPs this year either. It just hasn’t been a priority for me yet. In a perfect world we’d have everything, but then we won’t get the satisfaction of achieving our goals :D Looking forward to find out what plans you have for investing. The best kind of income is passive income. I’ve made some money from stocks and real estate so far this year but there are still a lot of good opportunities out there in the fixed income market, commodities, private equity, and the exempt market :) The nice thing about starting to build up investments at our age is we can make great use of compounding over time. As long as you diversify properly your portfolio will one day be so large that you won’t even need an emergency fund anymore because your assets can be leveraged to take care of any unexpected expenses (^_^)

    • Cait August 22, 2013 at 1:27 pm

      Sigh. One day I’ll be as smart as you, right?

  • Girl Meets Debt August 22, 2013 at 11:28 am

    Great achievable savings goals Cait! I also love how you’re going to have your (cup)cake and eat it to. Speaking of cupcakes, do you know any great bakery places in our hood where we can eat some cupcakes next time we meet up? :)

    • Cait August 22, 2013 at 1:28 pm

      YES, I do! Mmm… now I want a cupcake!

  • Lisa E. @ Lisa Vs. The Loans August 22, 2013 at 12:24 pm

    How exciting! I can’t wait for my debt to be gone so that I can ramp up my savings!

    • Cait August 22, 2013 at 1:58 pm

      I love that my little goals excite you! Even my tiny Emergency Fund makes me smile, but I know there’s a long way to go still.

  • Darcy August 22, 2013 at 12:30 pm

    Is 10% of take home pay what is suggested by financial planners as a minimum contribution to RRSPs? Is it less if you have a pension plan through work?

  • Tara @ Streets Ahead Living August 22, 2013 at 2:33 pm

    I too have contributed squat my retirement because I’m waiting on getting my 403(b) (401k for non-profit employees) set up at work and I basically have to wait until September when they have a bunch of new people coming. Once I get that all set up, I’m going to be a lot better about investing.

    • Cait August 23, 2013 at 8:46 am

      You and me both, Tara! Let’s do this!

  • Rob August 22, 2013 at 2:55 pm

    “What do you think of my goals for the rest of 2013?”

    All pretty reasonable and ambitious, Cait. It all depends however on where you park all this money so that it works for you. With the currently absurd savings account interest rates you don’t want to plunk it all in a simple savings account as inflation will over time gradually eat away at its purchasing power. Your saved money must continue to work hard for you in earning passive income (be it accrued interest or return on investment). Now right now you may not have enough investment knowledge to apply against these goals but it may be a worthwhile activity to seek out and pay a qualified investment counselor to guide you – but not one who will try to just sell you financial products (and thus earn a commission). Many of those types are pretty biased in their advice. No, seek out (after checking references) someone who gets paid exclusively for giving expert financial advice, geared to your risk personality and goals. Just a suggestion. After all, you use a doctor and a dentist for your physical health needs so it might be wise to seek out a qualified adviser for your financial heath needs. Why not run the idea by your friend Gail for her input? It can’t hurt to look into idea and you don’t need to save up a lot of money before considering it.

    • Cait August 23, 2013 at 8:50 am

      Great idea to talk to Gail, Rob! For the Regular Savings + Travel, I was just going to keep them in my investment savings accounts with ING (1.35% and could access the money within a few days if I needed to). However, I was going to put the E Fund in my TFSA (1.4%), but am willing to look into other options once I’ve actually saved up that amount. I’m certainly not opposed to asking for advice – just want to make sure I seek it from people I can trust!

  • sofia August 22, 2013 at 3:04 pm

    That cupcake looks delicious.

    • Cait August 23, 2013 at 8:51 am

      It was!

  • Alicia @ Financial Diffraction August 22, 2013 at 4:50 pm

    I think you’ll get that Emergency Fund topped up sooner than you think considering the other goals are “only” $1000 each.

    10k is also my Emergency Fund amount, and I’m nowhere near that right now. I do have access to some money in a TFSA if I need it, but I don’t want to. It’s just such a nice solid number. It would be amazing to look at that account and see five figures sitting there.

    • Cait August 23, 2013 at 8:51 am

      You’re probably right! I just want to accomplish a few small goals, before working towards the big one – I think I’ll feel safer having accessible savings, versus just a large account full of money I don’t really want to touch.

  • Tushar @ Everything Finance August 22, 2013 at 8:24 pm

    I enjoy reading about other people’s goals. It’s motivating for me. I know what you mean about feeling guilty about making purchases but you worked so hard to pay off your debt that you shouldn’t feel guilty! Hopefully the feelings will pass.

    • Cait August 23, 2013 at 8:52 am

      Thanks, Tushar! I hope so too.

  • Rita P August 23, 2013 at 5:14 am

    Cait, those are really great goals which you have kept to achieve this year. I hope you will be able to meet all those goals and do excellent as you are working hard. Having little and achievable goals motivates you a lot to reach them.

    • Cait August 23, 2013 at 8:54 am

      Thanks, Rita! My hope is definitely that accomplishing a few small goals will motivate me to start saving for the big ones. Gotta start somewhere, right? :)

  • Liz August 23, 2013 at 10:24 am

    Great goals! I think it’s an excellent idea to write down savings goals as well as those for paying off debt. I’m at the very beginning of paying off my student loan debt, but I definitely would like to have all four categories of savings that you mentioned when possible. Which do you think is most important to save for first?

    • Cait August 23, 2013 at 11:27 am

      Hmm, personally I’d say the E Fund is most important, because I don’t think anyone should feel like they have 100% job security – and we all need to pay rent/mortgage and the bills!

  • A August 23, 2013 at 12:29 pm

    $10K is our e-fund goal at this point too. It will take us to 3 months’ expenses. Once we buy a house we’ll bump it up to $20K/6 months’ expenses.

    Our e-fund should be done in September. Then we start on a DP on a house. That will take awhile. I like your idea of other savings accounts too. Like travel and just regular ol’ savings. I would love to have another travel fund going…I keep trying to convince J we don’t need a house, we need to travel instead :]

    My dream is to go to Europe next May for J’s 30th. Don’t think it’s going to happen though. Sure would be nice to have a trust fund right about now!

    • Cait August 25, 2013 at 12:50 pm

      That would be amazing! There’s a chance I’ll be going to Spain next summer… so the Travel Fund may have to keep growing in 2014!

  • Shelley August 24, 2013 at 8:45 am

    Why not take your emergency fund and invest into RRSP’s through the personal investment section of you bank account? You can purchase anything from GIC’s to bonds to stocks or ETF’s and cash in when the emergency arises. Same with your savings. There area online savings accounts that have higher interest rates than the banks. Check out RBC Esavings.

  • Rob August 24, 2013 at 3:09 pm

    Sorry Shelley but I have to disagree with you on this suggestion. It would be preferable to invest one’s emergency fund in non-RSP investments (like GIC’s, ETF’s, etc.). If you should invest the funds in RSP’s and then have to take some money out for emergency purposes then you will have consumed some (or perhaps all) of your yearly available RSP contribution limit, which is fixed based on one’s previous year’s income. Later, if funds become available to replenish your emergency funds, you may not be able to replenish them into the RSP. Investing in RSP’s is meant for future retirement purposes and to save taxes.

    The only non-RSP reason to take funds out of such RSP investments is when you intend to buy your first principle residence. In that case the feds allow you to pay the money back into the RSP because here your RSP contribution room is not impacted.

    • Cait August 25, 2013 at 12:51 pm

      I agree with you, Rob. I’m going to keep my E Fund in a TFSA for now, but will look at other options once I’ve reached my goal.

  • Sara Hamil @ They Call it Gumption August 27, 2013 at 10:03 am

    I’m also in a spot where I’ve had an expensive summer and have been looking to fall as being the point where I start to get myself back on track. I start teaching part time again in a couple of weeks (on top of all of my regular hours at my full time job), which means some healthy extra income. I’ll be using my new income to tackle the bit of debt I accumulated this month (I’m SO ashamed…) and taking a serious look at my savings strategy.

    Aside from RRSP and TFSA, I’ve never split my savings into distinct categories but now I’m thinking it’s time. I NEED an emergency fund and I plan on doing some traveling in the future so I should set that one up too.

    Ugh, why haven’t I been doing this all along?? #lessonslearned

  • Liliane September 1, 2013 at 7:33 am

    Hi Cait, I think your goals are very realistic. Just found this blog while reading Gail’s blog and very excited to follow you. I think it’s a great idea to save for small goals and then for your emergency fund. That’s what I’ve been doing. I would love to get to $10,000 also in my emergency fund but have a ways to go. I contribute to an RESP also and TFSA , so not a lot of money left over in the month. I also find it very motivating to read other peoples goals. It helps me keep things in perspective. I have a lot of reading to catch up on

  • David Smith September 4, 2013 at 5:48 pm

    You have illustrated very good points. Practical measures mean getting out of debt. Giving up on some unnecessary expenses can help us save and experience a better life.