The last few months have been a strain on most families. Even if you’ve been fortunate enough to maintain employment in these uncertain times, questions are rising up from families from all walks of life. Among them, “Should I use up my savings to pay off my debt?”
There’s no one right answer to this question. But here are a few tips to help you decide what’s best for you and your family.
Dealing with your debt.
If you have credit card debt, it’s important to know the debt isn’t your real problem. It’s a symptom of the problem—which is poor spending habits. If you’re well on your path to becoming debt free, it’s wise to focus efforts on continuing if you can.
But if you’re not? Pause, take a hard look in the mirror and go set up a zero-based budget you can actually stick to before you liquidate your savings to pay off debt. Making major financial decisions in times of panic without support can lead to ruin.
How much savings do I really need?
If you’re paying down debt, an emergency fund of just $1,000 is what you really need. The sooner you get out of debt, the sooner you can build it up again using cash.
That being said, we are living in what some might call “a state of emergency” on all fronts. If you are dealing with a loss of income or worrying your job could be the next one eliminated? Don’t feel like you have to pare down to $1,000 and put yourself at risk. Wait for things to stabilize and then get that debt snowball rolling.
Bottom line: Don’t panic.
If you have a robust emergency fund, don’t be afraid to use it. Avoid cashing out your retirement if you can, but do what you need to do. Bottom line—don’t let an emergency send you deeper into debt. Stay smart, proactive and level-headed as you ride out the storm.
And when you aren’t sure WHAT to do? Ask us.
We’re here for you—always ready to help you navigate uncharted waters and continue building a financial future you really want. No question is stupid except the ones that aren’t asked.