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The Great Debate: Paying Off Debt Vs. Stashing Cash For Emergencies

Monday, September 23, 2013 - 12:01 PM
by Michelle Singletery

During one of my recent online chats, I got involved in a debate with a reader about the need to have an emergency fund while paying off debt. Here’s how the discussion went.

The great debate: paying off debt vs. stashing cash for emergencies - The Washington Post
ShorebreakShorebreak2,700 posts since
Apr 6, 2010
Rep Points: 14,636
1. Monday, September 23, 2013 - 12:28 PM
This is not a "one-size fits all" answer as far as whether to pay off debt first vs. to save for emergency fund first. 

1. Credit card debt is bad, should be paid off ASAP due to high interest rate.

2. The problem with that reader is not whether to pay toward credit card debt or emergency fund.  He has bigger financial issue than that (e.g., credit card addiction).  To debate on which one to pay first is pointless.  He should really get his financial situation in shape (planning, budgeting, education; to name a few).  For him, he needs to do both at the same time; not one first or the other first.

3. For me, I prefer to put more money into the high-rate RCAs vs. saving toward emergency fund since the low-rate HELOC is my best available emergency fund.  I also have access to other funds if needed.  Emergency fund is defined as "whether one can come up with six-months expenses on short notice due to unplanned events."  If yes, it's ok. 

Just my 2-cents without retribution.
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,427
2. Monday, September 23, 2013 - 3:58 PM
Good one 51hh. Your post deserves to be sent to Ms. Singletery as an excellent rebuttal.
ShorebreakShorebreak2,700 posts since
Apr 6, 2010
Rep Points: 14,636