Paying Off Credit Cards vs. Establishing Emergency Savings

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Ron Blue answers the question: should I pay off credit cards or establish an emergency savings?

Two phrases that I hear a lot are “it’s all good,” and “it is what it is.”  Sometimes these comments feel like a way to communicate resignation or apathy, but they both apply to today’s topic of the value of paying down debt vs. the value of establishing an emergency savings fund.

First of all, “it’s all good.”  In the short term, there are only five ways that you can allocate money.  You can pay taxes, pay off debt, save, give, or fund your current lifestyle.  That’s it.  And, “it’s all good.”  Each of these uses of money is legitimate.  Scripture encourages us, in fact, to use money all five of these ways.   God exhorts us to pay our taxes in Romans 13 out of loyalty to the earthly authority.  He also tells us that debt hinders us in Proverbs 22:7.  We are encouraged to be a people of generosity in 2 Corinthians 8.  The wisdom of saving is expressed in Proverbs 13:11.  Finally, Paul gives advice about a believer’s lifestyle in 1 Timothy 6.  So, “it’s all good!”  

However, “it is what it is.”  While each of the five uses of money is legitimate in God’s eyes, it is important to be realistic as you assess your financial situation.  If your debt load is crushing, paying it off needs to be a very high priority for you.  Paying down debt is always an economically good decision, and it is has the added benefit of freeing you financially, emotionally, and spiritually.  If, however, you find that your unexpected big expenses are always getting in the way of larger financial goals, including paying off your credit card balances, it might be more prudent for you to establish a cash cushion that will protect your financial life in those emergency situations.  Then, you will be able to focus more completely on paying down your credit cards so that you can be free down the road.  Your financial situation “is what it is.”  You know it best and you must deal with the reality of it in your own life.  As you seek God, He will give you the wisdom to choose whether to allocate all of your excess toward debt or whether it is better to split it up in some way between debt and savings.  James 1:5 says, “If any of you lacks wisdom, he should ask God, Who gives generously to all without finding fault, and it will be given to him.” (NIV)

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