Would you ever use 100% of savings to get rid of debt?

Have you ever been really desperate to get out of debt? I’ve certainly been there. When you’re broke, this situation is pretty straightforward. You’re just trying to keep your head above water. But it gets trickier when you actually have some savings. Do you use your savings to pay off the debt, even if that leaves you unprepared for an emergency? Or do you keep the savings, even if that means spending more on interest payments for your debt?

A couple of months ago, I got this letter from a 28-year-old man who had just spent every last cent paying off his debt. https://www.thepennyhoarder.co…ngs-to-pay-off-debt/. He wondered whether that was a foolish move.

Had he asked me before paying it off, I would have suggested that he keep at least a three-month emergency fund and not to touch any retirement savings (not sure if he did the latter). But I’m not sure that it rises to the level of foolish. Foolish to me would be spending your life’s savings on risky investments or things you don’t need. It does make me nervous when I think of what would happen if he encounters a financial emergency. But hopefully, with no debt, he’ll be able to rebuild his savings quickly.

Is it a mistake to use 100% of your savings on debt? Or is getting out of debt the top priority?


I personally wouldn’t use all of my savings to pay off my debt…because then what happens when the debt is paid off and another emergency happens and there’s no savings to pay it off?


I hate having debt and understand the desire to get rid of it, however, I would keep an emergency fund for sure. No way would I leave myself with 0$ cushion.


I’m personally more risk tolerant, so I would personally use all my savings to pay off debt (I’m assuming you’re talking about debt with an extremely high APY and not a mortgage where it’s a few percent a year and part of normal monthly expenses).

Mathematically speaking, it’s much better to not have debt than to have debt since debt compounds in the negative so quickly.

Though I’d probably only do this if I’m confident I can build up a ‘nest egg’ back within the next few months and bet on the fact that an emergency’s not going to happen in the next few months.



There was a question from a member earlier about this and I responded to never use all of your emergency stash to pay off credit card debt, and I hold to that still. I related how that bit me once when I was younger–using all of my cash to pay off credit cards and get that monkey off my back. Well, shortly afterward, I had a serious emergency and then had to resort to a credit card! So no, I would never use 100% of savings to pay off credit card debt. Keeping cash for emergencies is also a priority, perhaps the major priority, as well as paying off debt.

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I have done it. I paid off debt leaving me with $2K in my savings. But I was able to save $1K per month after that so I will have a 3 month emergency fund in 4 months. It was scary but I just wanted the debt gone.


I would pay off the debt. If I had an emergency, I’d use credit card if I didn’t have cushion built back up. I see it this way - I’d rather be debt-free and risk having to charge on a credit card again. That would mean I’d be back in the same place so not so terrible in my opinion. Of course, if self-control is an issue, I might think differently.


I agree with much of what has been said here. Personally, I don’t think it’s a good idea to use your entire savings to pay off debt. Life comes quick and I know how things can quickly catch on fire, and you have no water (savings) to put them out. Although, i’m sure at this point this persons mind set is all in with regard to NEVER going back into debt. For some people this approach may be the mental kick start they need. I’m just not willing to take that kind of leap. History has shown me it’s boot and kicked me in the arse far too many times! I’d opt for a more simultaneous approach here. Pay off debt with a littel extra each month and save baby save!

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i am happy to say i have no debt, when my husband passed he left me debt free, but i do save money every paycheck

I would never advise someone to use all of their savings to pay off debt. What if an emergency arises? If there’s anything I’ve taken away from the events of the past year and a half is that emergencies do arise, they are completely out of your control, prices can skyrocket, and you don’t know when they’ll end. People have lost jobs when they thought they worked in markets that their jobs were stable. Companies closed.

I think that I would. Debt is stressful. You can start fresh and build the savings up which is usually not stressful.

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Interesting topic at this time as it sort of applies to me.

I just recently sold off a portion of my investments (I consider these my savings) in order to pay off all my credit card debt once and for all. ($3,500 of it is still from when this happened.)

I realize that this sets me back on my investing journey a bit but after going back and forth for quite some time I finally decided that the mental stress that the credit card debt has put on me is worth getting rid of despite the downsides of taking out from investments that I have built up over the past several years.

Just knowing in the back of my mind that I have credit card debt even though I knew I can always pay them off with my investments caused me to feel trapped.

That and the fact being that the interest on some of the cards was basically nullifying the returns I was getting on my investments.

That being said, I still have some money left over in investments so it still feels like a safe thing to do.

If I think about it, I probably would never use 100% of those funds to get out of credit card debt, unless I knew that by doing so I could rebuild those funds fairly quickly.

I think it just depends on your personal situation. For some, doing so might be the best thing they could do but for others, having a safety net in place might outweigh the stress that the debt might cause.

That being said, I can’t wait to make the final payment on my credit cards and be able to say I am credit card debt free once and for all!

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Here’s what I did. I cut my expenses (packed the same budget lunch for work for 2 years, coupons, cooking from scratch, bundled errands to save on gas, turned down heat, etc.) Then, I paid the minimum due plus something above and beyond. At one point, I was paying $250 extra and made progress only to have a job loss. Between jobs, I went back to paying the minimum and then back to paying it down when I was working. I struggled for a few years, but it was worth it.

When I had a pay cut of 25% at a 40 hour a week job, I took a Saturday job for 14 months to make up the difference. Did that mean only one day off a week for over a year? Yes, but that is what it takes to be responsible for your finances. Being an adult isn’t fun.

As soon as I could, I started focusing on an emergency fund too.