Wednesday, January 22, 2014

Emergency Fund vs Paying Off Debt

I have thinking about this for quite awhile now. What is the better way to go?

I can "justify" both ways. An emergency fund is a great thing to have. If something goes wrong with your home or car, you have this as a back-up. Or, as is our situation, one partner's hours are cut at work, you have a back up until things settle down.

On the other hand, paying off debt is huge. It's not paying 19% monthly interest; it's not having that weight hanging over your head. It's having the freedom to use the credit card in case of emergencies and then pay it off.

What are your thoughts on this one?


  1. We got some $ "back" when we bought our house so we decided to put it aside for total emergencies, I am glad we did. knowing it's there is comforting. But the debt is terrible too. Do you have anything for emergencies. We definitely don't' have enough $ for if DH got laid off, etc. we'd be working on that for a long time.

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  3. I think you save up an Emergency fund first; you can start paying down debt after that. Why? Well, like many folks out there, I live pay cheque to pay cheque...haven't had a raise in over three years and cost of living has risen each I have no true savings or rainy day/emergency funds. Because of my car accident, I am scrambling to find money for my deductible and am coming to realize I am going to have to dig into my RRSP for the second time in less than a year to cover emergency/unexpected expense, and the RRSP shouldn't be used like that. There's an old adage that you should always "pay" yourself at least 10% of your pay and put it aside. I think there's some value to that. It may mean for a period you are not able to do more than meet your minimum payments on your debt, but you WILL get to a point where you have enough in the rainy day/emergency and what you have been targeting for that can go against debt.