Just paid took 6k out of my savings fund - Having mixed emotions

[rhetoricalphd]

I am 31, no CC debt, own a house that I rent out (so I have 155k house debt), 13% of my income going to my 403 (b) every month (last year I made 95k), however I just took 6400 dollars out of my savings account (use betterment.com) (leaving me with 4200 dollars in my account). Now I have a total of about 6k in savings (across all of my accounts) due to paying off the loan (the loan had a 6.8% interest rate).

While I am ecstatic that I no longer have this Sallie Mae loan, I am feeling a bit uneasy about my savings being so low. I pride myself (and feel secure) on having at least 10k in savings just in case anything goes wrong (i.e- lose job, sickness, emergency with my rental property). I know if I work really hard I can have my savings back up to 10k by August (probably earlier) but I also do not want to completely alter my lifestyle over the next 3 months bc I am freaking out about this shortage of savings.

I don't really have a question, as much as suggestions for boosting savings back up quickly, encouragement, advice, do you think this was a good decision?

FYI- My job is really secure and I will get a lump sum of money in June (of about 6k) I want to use some of that towards a summer vacation (about $1200) and the rest I will just put back into my savings.

[riverwed070707]

I am 31, no CC debt, own a house that I rent out (so I have 155k house debt), 13% of my income going to my 403 (b) every month (last year I made 95k), however I just took 6400 dollars out of my savings account (use betterment.com) (leaving me with 4200 dollars in my account). Now I have a total of about 6k in savings (across all of my accounts) due to paying off the loan (the loan had a 6.8% interest rate).

While I am ecstatic that I no longer have this Sallie Mae loan, I am feeling a bit uneasy about my savings being so low. I pride myself (and feel secure) on having at least 10k in savings just in case anything goes wrong (i.e- lose job, sickness, emergency with my rental property). I know if I work really hard I can have my savings back up to 10k by August (probably earlier) but I also do not want to completely alter my lifestyle over the next 3 months bc I am freaking out about this shortage of savings.

I don't really have a question, as much as suggestions for boosting savings back up quickly, encouragement, advice, do you think this was a good decision?

FYI- My job is really secure and I will get a lump sum of money in June (of about 6k) I want to use some of that towards a summer vacation (about $1200) and the rest I will just put back into my savings.

You're single and make $95k a year? Should be able to plump right back up to where you started in no time. How much are you saving outside of retirement accounts each month? If its not $2-3k, I think we should talk about where all that extra is going??

[rhetoricalphd]

Thanks for your response. From September to March I have been saving 1025 a month. The rest of my cash goes to leisure (vacation, food, entertainment). Ie - I went to S. Africa in March and Hawaii in January.

Between March and now April I have had to pay the city 4k (expected, so I saved for this throughout the year) for city taxes and I dropped 5k on another Sallie Mae loan in March. All of which has impacted my savings cushion, which is now around 5k But Sallie Maw is forever gone now!

So I will be able to get back to stashing money away fairly quickly.

[Fishindude77]

95% of the US population would love to have your money problems.
Stinks to be a little low on cash, but it feels really good to clean up debts.

You are on the right track.

[autoxer]

Looking at this from your net worth statement, you reduced both your assets and your debts by $6,400, which doesn't change your net worth. You may not have as much in liquid assets, but you got rid of the high interest debt. You can also reframe the question, would you borrow $6,400 @ 6.8% interest in order to put it into you savings account? From that perspective it looks like a good move, but I think you should consider a higher target for your emergency fund.

I know you aren't living paycheck to paycheck and I don't know anything about your rental property, but even $10k seems low for an emergency fund. If you lost your job, how many months could you survive on your savings? If the house needed a big repair like the furnace, or a leaking roof, could you cover that? If the property was vacant for some period of time, how would that affect you?

[snafu]

Life is full of choices and I think it was super smart to pay off Sallie Mae in exchange for your desire to hold an unrealistic amount of cash which was losing buying power month after month since interest rates have been so low. If you look at your figures from a business-like, practical point of view, you have put that sum to work. You've also boosted your credit score by lowering your income to borrowed ratio. It would be reasonable to re-direct the sum that was going to monthly payments + interest you'd been paying as DCA to Vanguard's Index or Dividend Funds, re-investing profit. Lots better in the long term than looking at a sum like a youngster shaking a piggy bank.

If you're really bothered, you could examine each of your spending categories and temporarily reduce each outgo by 10%. You might stay in a businessman's 4-4 star hotel rather than 5 star for vacation and reduce vacation by one day. You could reduce entertainment category by one meal out, one missed movie or concert. Limited clothes budget to two items of genuine need and skip impulse buying until your need for non working cash is satisfied.

[daledegagne]

While I am ecstatic that I no longer have this Sallie Mae loan, I am feeling a bit uneasy about my savings being so low. I pride myself (and feel secure) on having at least 10k in savings just in case anything goes wrong (i.e- lose job, sickness, emergency with my rental property). I know if I work really hard I can have my savings back up to 10k by August (probably earlier) but I also do not want to completely alter my lifestyle over the next 3 months bc I am freaking out about this shortage of savings.

I don't really have a question, as much as suggestions for boosting savings back up quickly, encouragement, advice, do you think this was a good decision?

From an efficiency stand point, you made a great choice. Getting rid of Stupid Mae is always a good move. That said, you traded the feeling of security (which you're realizing as an after thought).

As for whether you should or shouldn't boost your savings faster or, just ride it out till later - I had a friend that used to keep a small container of lemon pepper in his car and he would take it out and smell it every once in a while. He liked it. Everyone else thought he was odd for using lemon pepper like that but hey...it was his lemon pepper.

Don't let anyone tell you that the things you want to do with your money aren't legit - $10K in cash isn't unrealistic (especially with a rental property..I Know). It's also not realistic. It is what it is and it's a choice you made to help you sleep at night. Don't let anyone tell you different.

If you're freaking out a bit now - you only have to make another choice (and it sounds like you already have) - Which is more important to you? Maintaining your current lifestyle, or getting your cash back to a point where you feel good about it again. Or is the answer somewhere in between?

There are no wrong choices here. You're prepping for the future, while living today. Everything sounds like it's getting taken care of so spend the rest as you please...even if that means plopping it in a bank account so you can look at it every once in a while and feel good about it.

[TBH]

A little tough love--13% into your retirement account is not very aggressive. And I don't think $10K is enough of an emergency fund. Are you an academic? I know university jobs are hard to lose, but still.

I would, in no particular order:

1. Save up to 6 months' expenses in your E-fund, especially if you might want to eventually buy another house to live in since it sounds like you don't live in the one you own. Having a bigger cash position will help you in an emergency and also help you be more nimble with future real estate decisions.
2. Pay off any remaining student loans, altho it sounds like that's done (which, congrats!)
3. Boost retirement contribs to 18%, which will still keep you under the limits
4. Take as many wildly expensive trips as you want after that.

[tripods68]

I

I don't really have a question, as much as suggestions for boosting savings back up quickly, encouragement, advice, do you think this was a good decision?

FYI- My job is really secure and I will get a lump sum of money in June (of about 6k) I want to use some of that towards a summer vacation (about $1200) and the rest I will just put back into my savings.

You seems to have a good money habit. I won't worry about dipping a bit as you stated since it paid off your debt. But maybe start cutting back on something else that you normally spend high...i.e., eating out. You are single, make good money, and the goal of 10K in Savings should not take that long, few months. Don't sweat it.

[AlexM1359]

I experience this in a similar way, but I did not pay a loan off, I spent all my savings to move to Europe from Canada, things didn't work out job wise, and i blew all my savings. You will save it up again over time, I wouldn't stress.