Pay Off Debt Or Contribute To Emergency Fund?
May 8th, 2006 | by Molly's Brother |Many people are often stuck, not knowing whether they should pay off their debt or contribute to their emergency fund. The short answer to this question is: DO. BOTH. NOW.
The long answer to this question: If you don’t focus on saving money for that emergency, then what happens when you are–in fact–faced with said emergency again? That’s right. You’re going to pull out your plastic handcuffs–aka your credit cards–and charge the emergency away. This might reduce stress and be helpful now, but in the long-run, it will only build on the anxiety you have from your financial problems.
You have to pay off your credit cards and build that savings account at the same time. If this means that you only write a check for your minimum payments for a few months until your savings account is fully funded, then that’s what you do. You don’t, however, ignore your credit card payments nor do you ignore your plan to build up your savings (doing so is what got you in trouble in the first place, isn’t it?)
