Do you want to get out of debt? You should do this first, according to Dave Ramsey

Image Source: Getty Images

Dave Ramsey actually recommends a preliminary step before paying more on your debt.

Key points

  • Many people want to be debt free, but have a hard time knowing where to start.
  • Dave Ramsey has provided some helpful advice on how to start paying off debt.
  • He suggests saving an emergency fund of $1,000 first before paying more on loans.

When you’re in debt, it can be frustrating to have to make payments every month and watch your hard-earned income disappear due to interest charges. As a result, it’s natural to want to get out of debt as quickly as possible.

Unfortunately, you may not know where to start with your payment efforts. If that’s the case, finance expert Dave Ramsey has plenty of tips to make repaying your loan easier. And Ramsey suggests that those who are interested in getting out of debt should take a key step to get started.

Ramsey believes this is the first step toward paying off the debt.

Surprisingly, the first step Ramsey suggests when he decides he wants to pay off debt It is not to start sending extra money to your creditors. Instead, he advises saving a small emergency fund of $1,000.

Now this may seem contradictory. In fact, his blog even acknowledges that this is not the advice most people think they’ll hear when trying to formulate a debt repayment plan. “You didn’t expect that, did you?” states the blog. “Why would anyone put money in a savings account instead of using it to pay off debt?”

But, as Ramsey makes clear, setting aside a small amount of money for unexpected expenses is crucial because “life happens” and emergencies don’t stop just because you’re trying to get out of debt.

If you not If you have this money, which you refer to as a “safety net,” then you face great risk as you work to pay off the debt. You could find yourself making progress in reducing your balances only to have to borrow more money when something comes up. Finding yourself deeper in debt once you’ve started the repayment process can be daunting, so much so that many people end up giving up on their debt repayment plan altogether.

Should you take his advice?

Ramsey’s advice isn’t always correct, but his suggestion to save a $1,000 emergency fund as a first step toward paying off debt is a good one.

If you don’t take this step, you can easily get stuck in a cycle where you pay part of your credit card balance and then have to reload your cards again when a problem arises. This can make you feel like you’re not making progress, so the sacrifices you’re making aren’t worth it.

Now, the exact amount you need to save for your initial emergency fund before you start paying down your debt may not necessarily be $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’d better set a goal of saving just $200 or $500 or less so you can be prepared for little. emergencies

If you have payday loans or other very expensive debt, it’s best to address it first and so switching to emergency savings just because the cost is so high.

However, it’s a good idea to prioritize saving some money for emergencies before sending extra money to creditors, so you can maximize your chances of sticking with your plans to be debt-free in the long run. You should seriously consider this approach when making your plans to deal with your debt forever.

The best credit card eliminates interest until the end of 2023

If you have credit card debt, transfer it to this top balance transfer card locks you in with a 0% introductory APR through the end of 2023! In addition, you will not pay an annual fee. Those are just some of the reasons why our experts rate this card as one of the best options to help you control your debt. Read the full review of The Ascent free and apply in just 2 minutes.

Add Comment