Save or Pay Debt?
A lot of people get confused about what to do first when it comes to saving money: pay off debt, save for their retirement, or just put money away for an emergency fund. Listen, if you are paying 18 percent interest on your credit card debt, it makes absolutely no sense to start a savings account where you will be lucky to earn 2 percent interest. And that 2 percent is taxable, which reduces your real return even more.
— Suze Orman, The Money Book for the Young, Fabulous, & Broke
Yolanda writes:
True, but by not having an emergency fund – of cash – a person will use the 18% credit card because after all, it is an emergency.
I am not an expert, but I can say from experience – I am much more at peace by having 6 months of living expenses – CASH as my emergency fund. And yes, we have paid off ALL our consumer debt – we are investing HEAVILY in retirement and college savings. Next stop, a PAID for house!
Thanks.