Prioritize debt paying

Put off debt payments to start saving now

If you’re among those who are out of work or earning less because of the pandemic, paying off debts is less important now that your cash is limited.

Now might seem like an odd time to focus on savings, but gathering any cash you can will give you more flexibility to respond to the next emergency.

1 Set a savings goal

Make sure you understand your current budget. Break down what you have coming in and your monthly expenses, including minimum debt payments.

Find ways to save money daily, weekly and monthly. You might be able to trim subscription services, save on groceries or shop for a lower insurance rate for your car or home.

2 Delay debt payments If

stripping down your budget and paying only minimums isn’t enough, consider contacting creditors and asking to pause payments.

“Be ready to plead your case,” says Jordan Sowhangar, a certified financial planner in Souderton, Pennsylvania. “They’ll want to know when you can repay before they put together a customized game plan for you.”

Which debts you can delay will likely depend on the type of debt and creditor:

• Credit card debt: This may be one of the easier debts to delay for a month or two. Note that depending on your creditors’ policies, you may still accrue interest while your debts are deferred.

• Mortgage: Entering into forbearance — where you can make a lower monthly payment or skip payments entirely for a time — may be your best option if you’ve been financially affected by the pandemic.

• Private student loans: Unlike federal loans, which have been put on hold through September, private student loans may be trickier to put off. But it’s still worth calling your loan servicer to discuss options if you’re struggling to afford payments.

3 Know when to use

savings Once you’ve saved a month or two of expenses, set some guidelines. An emergency fund is designed to handle unexpected expenses, such as car trouble, rather than to pay down debt.

When you have a moment of doubt about whether to put this toward debt, take the long view: A few hundred dollars saved this month could see you through lean times ahead.