Want to get out of debt? You should do it first, according to Dave Ramsey
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When you’re in debt, it can be frustrating to have to make monthly payments and watch your hard-earned income disappear in favor of interest charges. As a result, it’s natural to want to get out of debt as soon as possible.
Unfortunately, you may not know where to start your reward efforts. If so, financial expert Dave Ramsey has plenty of tips to make paying off the loan easier. And Ramsey suggests those looking to break free from debt should take one key step to get started.
Ramsey thinks it’s the first step towards paying off the debt
Surprisingly, Ramsey’s suggested first step when deciding to pay off a debt is not start sending extra money to your creditors. Instead, he advises saving a small emergency fund containing $1,000.
Now, this may seem counter-intuitive. In fact, his blog even acknowledges that it’s not the advice most people think they hear when trying to formulate a debt refund plan. “You didn’t expect this, did you?” the blog states. “Why would someone put money in a savings account instead of using it to pay off a debt? »
But, as Ramsey points out, it’s crucial to set aside a small amount of money for unforeseen expenses, because “life happens” and emergencies don’t stop just because you’re trying to get out of debt. .
If you don’t have that money – which he calls a “safety net”, then you face enormous risk as you work through debt repayment. You might find yourself making progress in reducing your balances only to have to borrow more money when something comes up. Finding yourself in more debt once you’ve started the repayment process can be daunting, so much so that many people end up abandoning their debt repayment plan altogether.
Should we follow his advice?
Ramsey’s advice isn’t always good, but his suggestion to save a $1,000 emergency fund as a first step toward paying off debt is a good idea.
If you don’t take this step, you can easily find yourself trapped in a cycle where you pay off part of your credit card balance, then having to recharge your cards in the event of a problem. It can make you feel like you’re not making any progress, so the sacrifices you’re making aren’t worth it.
Now the exact amount you need to save for your starter emergency fund before you start paying off your debt is not necessarily $1,000. If you don’t make a lot of money and it would take you a long time to save that much, then you might be better off setting a goal of saving just $200 or $500 or something smaller so that you can be prepared for few emergencies.
If you have payday loans or other very expensive debt, you might be better off taking care of that first and so switch to emergency savings just because the cost is so high.
But it’s a good idea to prioritize saving for emergencies before sending extra money to creditors, to maximize the chances of sticking to your plans to get out of long-term debt. . You should seriously consider this approach when planning to settle your debt permanently.
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