Let’s say you broke your arm and ended up owing a few thousand dollars unexpectedly. Or you have a running balance on a credit card and are tired of paying 10%-30% to use your own money over time. So, want to know how to pay off debt?
If you answered, “I’d use cash out of my emergency fund,” I’d give you a hug if I could. I personally would recommend a $5000+ emergency fund to absolutely anyone. More if you don’t have health insurance or have high deductible health insurance like me.
My husband and I keep a $15,000 savings account just in case we are in a bad accident and have to hit our health insurance maximum out-of-pocket level. Having cash on hand to keep you on financial track when life happens is my number one suggestion.
If you don’t have a few thousand waiting around, here are some more options:
Earn extra money – get a part-time job or start a side hustle to earn extra cash. Sell stuff – this only works if you only do this once in a while and actually have stuff worth selling. Look into short term loans – look to see if they have a better interest rate or better payment options for you. Rent out space – we have roommates living in two extra bedrooms in our house to bring in extra money each month. Downsize – if you are falling behind financially, it may be time to get back to your broke-kid roots. Downsize your home, your vehicle, and your lifestyle if you just aren’t bringing in what you need to stay on top of your expenses and your savings for the future.
Honestly, it’s always best to live on less than you make so your savings can cover what you need. But like with everything else in life, there are options to look at and choices to make.
How would you pay off debt?