Paying off every debt tomorrow sounds wonderful until the bank balance hits zero. Credit card payments disappear, loan balances reach nothing, and monthly bills suddenly look less intimidating. Then the car needs new tires, the refrigerator quits, or the water heater springs a leak. Suddenly, the same person who eliminated every debt must find cash somewhere else.
This decision involves more than choosing between interest charges and savings. It pits two kinds of financial security against each other: freedom from existing obligations and protection against the next unexpected expense. The right answer depends on the debts involved, the cash available, and how quickly the household could recover its savings.
