- As much as you want to put every spare dollar toward debt, you need a financial safety net.
- If you eliminate discretionary spending entirely, you could face debt fatigue.
- You may qualify for a debt relief program to negotiate down your debts.
When you're overwhelmed by debt, it can be tempting to throw any spare money at your payments. A bonus from work, money from your self-care budget, $10 you found on the sidewalk — anything and everything goes toward paying off your debt as quickly as possible.
A 2026 study by Accredited Debt Relief and Money.com surveyed 2,000 U.S. adults who reported having debt in the last year. When asked how they were chipping away at their debt, 40% said they had cut back on discretionary spending, 39% paid more than the minimum due, and 23% withdrew money from savings.
Working to become debt-free is an admirable goal, and putting every dollar you have toward repayment can seem like a smart move. But there are three main reasons why this may not be the best strategy.
1. You should have a financial safety net
Putting all of your money toward debt payoff can be dangerous if you don't already have a full emergency fund. Both forgoing savings and withdrawing cash from your savings account to pay down debt carry significant risks.
Leo Chubinishvili, CFP® and Wealth Advisor at Access Wealth, says pulling money from savings may seem like an obvious short-term solution. A high-yield savings account could pay only 3% or 4%, while a credit card might charge 20% or 25%. Mathematically, it makes sense to focus more on your credit card debt than your savings.
It doesn't always make sense in the long run, though.
"When you pull money from savings to pay down your debt, that means that next time you have an emergency, you don't have that bucket anymore," Chubinishvili says. "And when you don't have that bucket anymore, that means that you're forced to borrow again from the credit card at 25%. That is the biggest risk."
Depending on the financial emergency, you may even have to sell stocks from your brokerage account at a loss. Withdrawing funds from your 401(k) or IRA is an option — but if you're under age 59 ½, you'd likely pay a 10% penalty and ordinary income taxes on the amount you withdrew. The financial burden could snowball.
However, if you have a financial safety net, you can use that money to cover a financial emergency rather than going back into credit card debt or dipping into your assets.
Many experts recommend keeping at least three to six months of necessary expenses in an emergency fund. However, even starting with $1,000 or $2,000 puts you in a safer position than having no rainy-day fund.
2. You could experience debt fatigue
Some people recommend eliminating discretionary spending completely until you pay off your debts. No more eating out, going to the movies, or buying lattes. But Chubinishvili disagrees.
"I don't see how you could go without spending anything outside of just bills," he says. "I don't think that's realistic."
Cutting back on discretionary spending and reallocating that money toward paying off debt can be a good idea. But if you don't allow for any fun purchases for months on end, you risk burning out on your debt-payoff journey, an experience referred to as "debt fatigue."
Debt fatigue occurs when you feel emotionally and psychologically worn down from giving up every experience with friends or little treat you used to enjoy. This can take a toll on your mental health, and it may even result in taking on more debt.
If you feel discouraged or like you aren't making enough progress, you might give up on your payoff journey. Or you could crack and put a large purchase on a credit card because you feel like you deserve it after depriving yourself for so long.
3. You may be able to negotiate down your debts
If you can negotiate your debts, you can create financial wiggle room to get more from your money today.
Debt relief programs involve negotiating with your creditors with the goal of ultimately paying less overall. If you enroll in debt relief, you might not have to use every spare dollar to pay down your debt.
After an initial consultation (typically free), a debt relief company creates and shares a plan for your next steps. If you agree to work together, the company negotiates with creditors on your behalf to lower your balances.
A reputable debt relief company like Accredited Debt Relief won't promise results and will never ask for payment up front.
Becoming debt-free is a great financial goal, but it doesn't need to be your only financial goal. It's equally important to build savings, pay to treat yourself every once in a while, and ultimately work smarter, not harder, to pay off your debt.
Created by the Commerce Team at Business Insider with Accredited Debt Relief.
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