It is a common horror story of the modern era that many of us struggle with debt daily without making much progress. With this problem plaguing your life every day, paying debt may seem like a great idea, but it could turn out to be the wrong move if you do not have a budget and emergency savings in place.
Fund Your Emergency Savings
If you are living paycheck to paycheck, the idea of funding an emergency savings account may seem impossible. However, if you create a budget and review your spending you will be able to see where you are wasting money. In addition to cutting back your spending, you can also increase your income through many different avenues. If a part-time job will not work in your current situation, you can have a yard sale and start selling things you don’t use or can live without.
The Debt Payoff Balance
If you are struggling with debt, the emergency savings will protect you from adding more fuel to your debt fire. In the event, you are forced to take money from your emergency savings, stop paying extra towards your debt until you replenish your fund. When the savings account is full again, go back to attacking your debt.
I Have A Budget And Emergency Savings – Now What?
The two main debt payoff methods that are constantly debated are the Debt Avalanche Method and the Debt Snowball Method. Even with their differences, they both recommend paying off debt in the same manner:
- Pay the minimum on all of your debts except the one you want to pay off first
- Put all of your extra money towards one debt at a time
Paying off debt can be scary but if you have made the decision to break free from it, make sure you set yourself up for success! Make sure you have a budget and emergency savings in place before you tackle that debt. Without these two items, you’re bound to end up back in debt again. For a more expert opinion to allay all your fears and doubts feel free to contact us.