Inflation and Tariffs Have You Worried? Here’s a Plan to Make You More Financially Secure

Money was tight for most Americans before the Trump Administration announced its tariff increases on April 2. Now, they face financial strains amidst a new uncertainty: What does the future hold for the U.S. economy, and what will it mean for Americans’ ability to get by?

Americans’ non-mortgage debt now sits at historic levels, according to the Federal Reserve Bank of New York. Since pressure from inflation began two years ago, people have had less money left over after their expenses, spurring the need to borrow for purchases, budget shortfalls or emergencies. As Federal Reserve Governor Christopher Waller put it, in a speech on April 14, “tariffs are the elephant in the room” for most Americans, as the overlap between U.S. Foreign policy and economic policy could breathe new fire into inflation.

“Under [a] large tariff scenario,” Waller said, “economic growth will likely slow to a crawl and significantly raise the unemployment rate…I expect inflation to rise significantly, but if inflation expectations remain well-anchored, I expect inflation to return to a more moderate level in 2026.”

Hearing about the potential for the return of elevated prices, my friends and family ask me: How can we get to a better place financially when there is so much uncertainty? It’s a material conundrum because improving one’s finances usually means paying off debt. But, if you send your savings to a lender to pay off a loan, what will you do when you need to make purchases, handle budget shortfalls, or respond to an emergency such as a job loss?

I use a simple plan to navigate uncertainties like these; all you need to execute it is a savings account or money market account.

Balancing uncertainty and debt repayment

Outside of the tariff worries springing up this April, it’s not uncommon for people to ask: Which is better when repaying debt? Do I send extra cash to a lender or hold onto it? It also applies to student loans, car payments, home equity lines, and credit card balances.

Many people send extra money to their lender each month when they’re working on repaying a loan. But here’s the problem with that approach: Those extra payments don’t reduce the monthly obligation. But, doing it that way has another downside: It exposes you if any emergency arises, especially if you’re one of the 59 percent of Americans who say they don’t have enough savings to cover an unexpected $1,000 emergency expense.

Without savings, the next surprise expense pushes you back into debt.

That’s why I propose a different approach: Accumulate and Eliminate. Rather than rush to pay off debt in small pieces, save enough money to pay off a loan in its entirety. For many, it’s proving to be a more stable way out of debt, especially in an economic landscape that could end up in a recession.

Here’s how it works, and why it may be a better strategy than sending every extra dollar to your lender.

Why accumulate and then eliminate?

Say you owe $12,000 on a student loan and pay $300 a month. If you send an extra $100, you’ve chipped away at the balance, but your monthly obligation stays the same. Letting go of that $100 doesn’t change your payment schedule. Though it slightly lowers the interest you’ll pay, you still owe $300 next month.

Now imagine that an unexpected car repair or dental bill hits. You’ve sent your extra cash to the lender. What now? For many, it means turning to a credit card. That means your debt repayment approach actually creates more debt because it leaves you exposed to the unexpected. And, when the unexpected strikes, you owe even more in payments, making it even harder to come up with extra.

Sending your savings to a lender may reduce a loan balance, but you’ re more at risk in uncertain times. So, what can you do instead?

Try accumulating first

What if you saved it instead of sending $100 extra to your loan?

That’s the core of the Accumulate and Eliminate method. Every extra dollar goes into a savings account, money market account, or even a certificate of deposit (CD) if you want to push harder with interest-earning. Once you’ve saved enough to pay off the entire loan, plus a small buffer, you eliminate the debt in full.

Let’s say you owe $10,000. Instead of attacking it slowly, you save $11,000. You keep the extra $1,000 in savings and pay off the loan in one move. That monthly payment—say $275—now disappears. You’ve reclaimed your cash flow, increased your savings, and done without ever taking risks that emergencies require more borrowing.

This strategy helps you avoid two common traps:

• You don’t end up broke after trying to be “responsible.”
• You reduce the chance of borrowing again when something unexpected happens.

Ensure your savings are earning competitive interest

If it takes a year or two to accumulate enough to repay a loan, you want that money to work for you. That’s where CDs or higher-yielding savings accounts come in. If you keep your cash, it can help you get to the total payoff faster.

With interest rates still elevated, you can find CDs paying an annual percentage yield (APY) of 4 percent or more. If you’re sitting on $5,000 while working toward your $10,000 payoff goal, that’s $200 in interest you might earn during the accumulation period.

Compare savings and CD rates regularly while accumulating funds to repay a loan. Online banks and credit unions often offer rates five to 10 times higher than your longtime, traditional accounts—and even slight boosts in APY can add up over time.

Growing your capacity for saving each month

Once the debt is gone, you don’t just save money—you create more excess cash flow.

That $275 monthly loan payment you eliminated can now go to your savings account. If you were saving $100 a month before, you can now shovel $350 into a savings account to pay off your next loan. Instead of a debt repayment “snowball” – that pays off debt but leaves you with no capital – this savings snowball makes you more secure and turns old payments into contributions to your savings.

Over time, this flips your financial picture. You’re no longer scraping by to pay others. You’re building your capital and resilience, and you retain some capital even when sending a big payoff check.

Bottom line

It’s easy to feel like the “responsible” thing is to send every extra dollar to your lender. But if that leaves you without savings, you’re one unexpected bill away from going backward. With the accumulate and eliminate approach, you gain flexibility, maintain liquidity and can ultimately get out of debt—permanently.

You’re already used to making payments. If you’re to go through the pain of paying off lenders, you might as well generate a new habit: Paying yourself first, into your savings account, then you can gain all the benefits of having savings, even when you’re done paying off loans.