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Why We're Taking A (Short) Break From Debt Repayment

(Originally posted on The $76K Project on 6/18/18)

A few days ago, I shared that Fortysomething and I will likely be able to pay off our third and last credit card by the end of the month. We're over halfway there: "only" $4300 to go. To be honest, I am nothing short of obsessed with getting this done, to the point where I am needlessly checking account balances twice a day.

In the meantime, we've been going back and forth on what to do next: immediately go all-out on paying off my $10K in student loans? Stock up the emergency fund, then focus on student loans? Ramp up investments?

After much discussion, we still haven't made a firm decision. My guess is that we'll probably try to knock out my student loan debt as quickly as possible, then increase savings as we pay down Fortysomething's student loan, which currently stands at a little less than $40K. We *may* also start shopping around for a home loan, just to see whether we could find a mortgage with a lower monthly payment than our rather exorbitant rent; if that's the case, we could be looking for a house by the end of the year.

So the specifics of our long-term plan are up in the air, but what we have decided is this: in July, we're going to take one month off from all-out debt repayment. We'll still be making our overall minimum payment of $600, of course, and we'll still be adhering to a budget, but for just this short while, we're not going to be quite as aggressive in our quest to be debt-free. Instead, we're going to deploy our disposable income elsewhere.

Here's why:

(1) We want to celebrate paying off the credit cards. When we started this journey last year, we had over $22K in high-interest credit card debt. Getting rid of that ball and chain is a big deal, and we need to take some time to high-five ourselves for the achievement. So what's the celebration plan? Well, I've asked for a few days off work, and we're going to head to the mountains for a little R&R at an inexpensive Airbnb. We'll try to be as frugal as possible - cook most of our own meals, find free activities - and of course we won't be racking up additional debt in the process. But yeah, it's time for a mini-vacation. I am so ready.

(2) We have a list of things we've been waiting to purchase, and now is the time to do that. In particular, we're low on kitchen supplies, which is kind of inconvenient for people who cook most of their meals at home. Our wish list includes some plates, a pizza stone, a wok, and a saute pan. We also want to stock up on some home essentials - toiletries and the like - that are less expensive when bought in bulk.

(3) We just need a mental break from the debt repayment grind. Don't get me wrong. I'm thrilled we're ditching our debt, and seeing our net worth increase month by month is exciting and rewarding. But for more than a year now, a huge chunk of our lives has been about debt. Frankly, it's tiring: tiring to always be tracking expenses to the penny, tiring to have to say no to so many things, tiring to constantly be reminded of our mistakes. We need some time away from this whole process so that we can re-energize and gear up for the next phase.

(4) We want to be strategic as we move forward. From a purely financial perspective, the best next step would be to throw all of our disposable income at our student loans. But here's the thing: even if we put every extra last penny towards those loans, it'll still take between two and three years to pay it all off. That's a long time, and realistically, I don't think such a rigid, unforgiving plan is going to work for us. We'd like to build a larger emergency fund, and we'd like to increase our investments, especially because we're not in our 20's anymore and need to make up for lost time in a serious way. Taking a breather in July will give us a chance to figure out what to do next.

So that's the plan! If you've been paying off debt or have paid off debt in the past, have you ever taken a break from the process? What were the pros and cons?

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