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?