What comes first, the
chicken emergency fund or the egg paying off credit cards?
Manisha Thakor, author of On My Own Two Feet, says to go for the emergency fund first. Her reasoning is that the average “unexpected” expenses for Americans is $2,000.00 per year. That sort of price tag can plunge you even further into credit card debt, starting a vicious cycle. Yet, to me, even more frightening is that Manisha writes that vast majority of us only have about $500.00 in savings. I want to do better than that. So even though I wrote about saving for an emergency fund immediately, I’m starting to re-think my approach.
Plus, I did what any blogger would do by asking my personal finance buds on twitter for the answer. Here’s what they said:
And you know what, I tend to agree with them. I’m ready for the cards to be gone first. If an emergency comes, I will just do the best that I can. The good thing is that with the large amounts of extra freelance work that I’ve been doing lately, I can now write down the following goals:
- Pay Off the last credit card by October, 2012 – $2,000.00
- Pay Off Hubby’s Undergraduate Student Loan #1 by October, 2012 – $358.00 (This loan is so low; only one more payment!)
- Put $5,000 in Emergency Fund by December, 2012
So, wish me luck in this endeavor. I am not doing anything differently than I usually do except focusing my savings into one specific plan to snowball my finances. So, instead of taking my leftover each month and diving it among the 5 things I am currently saving for, I am taking one at a time. It’s actually more fun this way, and I’m really excited about the possibilities!
What do you think? Credit cards first or emergency fund? I want to hear it!