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Emergency fund or paying off debt first?
Usually a bit of both, in the right order.
If you have high-interest debt, every dollar in savings can feel like it should go to the debt instead. But without any savings, the next surprise goes straight back on the card.
A common order
- Keep making minimum payments on everything
- Build a starter emergency fund
- If your employer matches retirement contributions, consider contributing enough to get the match
- Put extra money toward high-interest debt
- Then grow the emergency fund to three to six months
Why it works
The starter fund stops the debt from growing every time something breaks. Then paying down high-interest debt saves you the most money.
General information, not financial advice. Your situation may call for a different order. Penny Vaults isn't paid by any bank or lender.