Everyone wants to be debt free.

Who in their right mind wants to send thousands of dollars to banks due to debts racked up on high-interest credit cards?  Or, God forbid, Payday loans?

And in normal circumstances, I would tell you to stick to the following debt snowball script:

  1. Save a thousand dollar beginner emergency fund.
  2. List ALL your debts, smallest to largest.
  3. Pay the minimum payment on each EXCEPT the smallest one.  Take any EXTRA cash (including any cash you have over your $1,000) you can scrape together and pound on that debt until it’s gone.
  4. Once that smallest one is gone, take all the money you were paying toward it and roll it over to the next smallest one and repeat the process.
  5. Keep repeating until you get to the last (and largest) one.
  6. Once you are debt free, go back and build your $1,000 emergency fund up to 3-6 months of expenses.

Yes, that is what I normally would advise.

But that was then and this is now and these are NOT normal times.  So, I now advise you make some adjustments to your debt repayment plan.

First, $1,000 is no longer enough of a beginner emergency fund in the age of Covid.  So, STOP your debt snowball if you are currently in it, meaning no more extra payments above and beyond any minimum payments, and pour that cash into your emergency fund until you reach 3-months worth of expenses, minimum.  And certainly, do not start your debt snowball until this is done.

Just to be clear, I define living expenses as all your fixed expenses: Mortgage/Rent, Utilities, Debt Obligations, Food, Transportation.  In other words, if it has a due date on it each month, it’s a fixed expense.

This is now the new minimum standard for your BEGINNER EMERGENCY FUND.  Do not start your debt snowball until you have this minimum amount.  And if things look shaky, go for 6 months’ worth of expenses.

Once you have 3-6 months’ worth of LIVING EXPENSES (Notice I do NOT mean income) AND you have a stable income for the foreseeable future, you can restart your debt snowball.

I know it aches to have cash and the ability to knock a debt out.  I feel you.  I’m looking at one particular debt I have right now that I could click and be done with.  But I have to control my urges.  There is simply no replacement for cash in this critical time.  Cash is king.  Let me explain my reasoning.

Say you take your savings down to $1,000 and you get to work paying off that nagging credit card.  If you don’t lose your job in the course of this and you make it to the end of the debt, good for you.  But banks have a pesky habit of “limiting exposure.”  That’s a fancy term for seeing you as too risky to give credit to. They did this on a large scale in the last downturn in 2008, and they will do it again, mark my words.  So as soon as you pay off that debt they shut down your line of credit. 

You are now 1) Out of all the cash you just sent them and 2) Without the line of credit that you might desperately need if you lose your job or something else comes up.  That’s a double punch to the gut.  If you had held onto that cash, when they shut down your credit, you would still have the cash.  They can’t take that away from you.

So, if you follow the new rules, once you pay off your debts, your immediate next step is to save ONE YEAR of living expenses.  This is now the new standard for your fully-funded emergency fund.

We can get through to the other side of this intact.  It just means making some adjustments, tightening our belts and looking for ways to increase our income, particularly developing multiple streams of income.  That way, in case Covid takes out one stream, you still have the others coming in.

For more reasons for starting a side hustle now, check out my article here.

If you want tips on how to start and run a business, or handle your money more wisely, follow my blog at  You can also schedule a free discovery coaching session with me there. 

In the meantime, stay safe and love the ones closest to you without reservation or regret. I wish you all the best!   And remember, Own It, Be It, Achieve It.

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