Savings and debt are often thought of as separate financial concerns. However, some people think of the idea to pay off their debt each month through their savings account. Whether this could help or harm your finances depends largely on your current financial circumstances. If this does not work for you, you can also try some of the top debt-paying strategies. When your debt is bringing you to bankruptcy, try asking a Tennessee bankruptcy attorney for help.
WHETHER TO USE SAVINGS TO PAY DEBT
Deciding whether to use the money in your savings account to pay off debt is no small decision. Part of making a healthy decision in anything is weighing the costs and benefits. It can help to look at the top benefits of a savings account:
- Back up for financial emergencies
- Feeling financially secure
- Building to your financial goals
The costs of using your savings account are decreasing each of these benefits. Dipping into your savings account each month to pay off debt almost defeats the purpose of a savings account. One of the main utilities of a savings account is backup money. When you regularly dip into savings, you decrease the amount of money you might need later on.
However, it turns out that in a 2021 study conducted by the Consumer Financial Protection Bureau, around 90% of people tend to use part of their savings to pay off debt. Not only that, but they also tended to use more than half their savings overall to pay their debt. None of this seemed to have any relation to doing this because of credit card interest rates.
We know that most people want to use their savings to pay their debt even though the costs may outweigh the benefits. Look at your savings account. If you have enough savings to cover your income for at least six or 12 months, then this could work for you.
TOP DEBT PAYING STRATEGIES
When you do not have enough in your savings to pay debt and be financially secure, then consider other ways. There are several ways to pay off debt, but the most effective ways include:
- Ask for a lower interest rate
- Increase your monthly payments when you can
- Seek odd jobs and passive income
- Transfer your debt to a zero percent deal to eradicate interest
- Sell anything you do not need or want for extra money
Not everyone realizes they can also use the statute of limitations to escape old debt. Debt older than ten years may not be legally enforced depending on where you live. Contact a bankruptcy lawyer to find out what your options are.
BANKRUPTCY LAWYER IN CHATTANOOGA, TN
Finding out you might have to turn to bankruptcy to manage your debt can be daunting at first. Consider contacting us at Tom Bible Law by dialing (423) 690-7712 for a consultation today about your financial situation. Our experienced Tennessee bankruptcy lawyers can help you figure out options for escaping your debt through bankruptcy. We can be found in your local Tennessee cities of Chattanooga and Tullahoma.