I thought it was time to address this question since I get asked this so much. So here is the short and sweet answer…NO!
Keep reading to see what you should do instead.
Why You Don’t Want To Drain Your Savings Account
Here is a question for you. What if you have an unexpected emergency and your account is empty?
What are you going to do to pay for that emergency if you don’t have any savings? It is the instinct of American Culture to charge unexpected expenses to a credit card when we don’t have cash. Or we take out a personal loan from a bank.
Now is a good time for you to reflect on what type of emergencies you could have in your life. Below are some things for you to consider.
Do you own a home?
- The Furness could quit.
- The A/C could quit.
- A roof doesn’t last forever and can be damaged.
Do you own a car?
- Do you have a tendency to collect speeding tickets?
- Does your car need new brakes, tires, oil change, or a windshield replacement?
Keep your savings as your emergency funds to cover these if they pop up unexpected. How much you keep as an emergency is up to you. I prefer to keep $5,000 since that could cover the large home owner expenses listed above.
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How To Pay Off Your Credit Cards Instead
Paying off credit card debt is a series of habits. These habits can be applied to any debt you are trying to pay off. But here is what I want you to understand.
There is no such thing as a quick fix to paying off a lot of debt!!
If anyone promises you that you can pay off $50,000 of debt in 10 months or less they are Lying. Yes some people have achieved this but they did it by taking drastic measures.
I know one woman paid off this much debt in 10 months because she moved in with her boyfriend for a year, sold her car, and rented her house out furbished to a stranger for $500 above what she had to pay on the mortgage every month.
Is this something you are willing to realistically try? If you have a family there is no way this will be possible.
Here are the steps I recommend taking that I know work for fact:
- Consider a side job in order to bring in extra income.
- If you have multiple credit card debts pay above the minimum payment on only one of the accounts.
- Pay the minimum payment on the other credit cards
- Start paying off the smallest balance first.
I understand that most of you are single parents and a side job may not be feasible. However, paying the minimum balance on all of your credit card debts except one will get you closer to a win.
I don’t know about you but if I see progress sooner rather than later I stay motivated to stay on task.
Paying above the minimum balance on the smallest bill will get you that quick win.
Once that credit card bill is paid off you can apply what you were paying toward that card to the next card. This is known as the snowball method (click here to learn more).
For example: let’s say you are paying $200 off of the card you are paying off. Then the second card is receiving a minimum payment of $150. When that first card is paid off you’ll be able to pay $350 (200 + 150) per month on the second card.
Like I said this will take time. You only make so much money per year. In the end it isn’t about how much you make. It is about how you choose to spend it.
Concluding Thoughts
Never drain your savings account to pay off a debt. If you didn’t have to drain emergency funds to do it I would be for it.
I prefer to keep $5,000 in savings for emergencies such as the Furness or A/C going out. You need to be able to pay cash for an unexpected financial emergency.
Otherwise you wind up maxing out your credit cards again. But this time you have no savings to fall back on. Paying off debt is not a quick fix and never believe anyone that tells you anything different.
Instead, pay off your credit card debt by taking on a side job, only paying above the minimum payment on one credit card bill, and pay off the smallest balance first. This will give you a quick win and free up that payment to put toward a bigger balance.
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