Making Sense Of Cents

Learn how to make extra money, how to save money, how to start a blog, and more.

JOIN OVER 300,000
MONTHLY READERS!
  • HOME
  • BLOG
  • About
  • Categories
    • SAVE MONEY
    • Side Job Ideas
    • Blogging Tips
    • Budget Tips
    • Career Advice
    • College
    • Pay Off Debt
    • Extra Income
    • My Life
    • Minimalism
    • Pet-Related
    • Real Estate Help
    • Retirement
    • Product Reviews
    • Self-Employment Tips
    • Travel
      • RV Life
      • How To Get A Cruise For Cheap Or Even FREE!
    • Wedding
  • How To Start a Blog
  • FREE FB GROUP
  • Recommendations
  • Contact
    • Contact
    • Advertise
    • Blog/Website Coaching Services
  • How To Save Money
  • Make Extra Money
  • Affiliate Marketing Course
  • Travel

Emergency Fund or Pay off Debt?

June 14, 2013 BY Michelle Schroeder-Gardner - 108 Comments

This post may contain affiliate links. Please read my disclosure for more info.

Share10
Pin1.4K
Tweet
Flip
Share1
+15
Share
Stumble6
Shares 1.4K

Should You Have An Emergency Fund or Pay off Debt?Hey everyone! Happy Friday. Today, I have another one of my “short” question posts about whether you should have an emergency fund or pay off debt, mainly because I am extremely nosey. I'm assuming all of you are nosey too.

One of the reasons why it's taking us a little bit longer to pay off my $38,000 in student loans is because I refuse to touch our emergency fund. I am an extreme worrier and am always afraid that something may happen. We have about 5 months of expenses in our emergency fund (could last a lot longer if we cut things out of our budget), and I want to keep it that way.

Luckily, my student loans will be gone this month, so I don't really have to worry about this question anymore, but I know that others have questioned what they should do.

Now, why don't I want to touch our EF? Well, our EF covers many, many things. While I don't think that a job loss would kill us, a combination of many things happening would. My job is stable, but what if all of my freelancing went down the tank, there was a job loss, something bad happened to the house AND something happened to the dogs?

Well, this is where our emergency fund comes into place. Some of you might be thinking “oh, all of that wouldn't happen in one month.” But, what if it does? Our EF gives us peace of mind! When one thing goes wrong, it always seems like everything else that could possibly go wrong, goes wrong also.

Some recommend that while you are paying off debt, that you keep just the bare minimum, such as $1,000 in your emergency fund. Others suggest that you build up your emergency fund FIRST and then pay off your debt.

What would or do you currently do – have an emergency fund or pay off debt? How much is in your emergency fund?

What does your emergency fund cover? Where do you keep it?

 

Join the free Master Your Money course!

Join the free email course and finally learn how to manage your money better, pay off debt, save more money, and reach financial freedom.

Success!

There was an error submitting your subscription. Please try again.

Powered by ConvertKit

Related Posts

  • Reader Question: I'm Getting a DivorceReader Question: I'm Getting a Divorce
  • Reader Question: I Quit College In The Last SemesterReader Question: I Quit College In The Last Semester
  • HELP! My Significant Other Makes Me Pay For EverythingHELP! My Significant Other Makes Me Pay For Everything
  • Would You Move To A Completely New Place?Would You Move To A Completely New Place?
  • Using Savings to Pay Off DebtUsing Savings to Pay Off Debt
  • Do You Like Your Job?Do You Like Your Job?
Share10
Pin1.4K
Tweet
Flip
Share1
+15
Share
Stumble6
Shares 1.4K

108 Comments
Filed Under: Budget Tagged With: Budget, Q&A

About Michelle Schroeder-Gardner

Michelle is the founder of Making Sense of Cents, a blog about personal finance and traveling. She discusses how her business has evolved in her side income series. She paid off $40,000 in student loans by the age of 24 mainly due to her freelancing side hustles. Click here to learn more about starting a blog!

Comments

  1. james says

    June 15, 2013 at 8:44 pm

    ah… what emergency fund? i’m racking up the student loans as we speak! i should be about 45-50k in the hole after school, but more after grad school. my BF and i more than okay with living in an apartment to pay off our loans. i havent gotten this far yet in my planning, but we’re been talking about it and getting comfortable with the inevitable makes it easier to deal with when it finally happens, i think.

    xx james

    Reply
  2. cantaloupe says

    June 16, 2013 at 12:53 pm

    I have a few thousand in my savings fund. I have a huge amount of credit card debt, so every time I pay some of that off, I have that amount of my limit back, haha. Which I know is not the same thing, but it makes sense for me. I lost my job a year and a half ago, but I didn’t even touch my savings before I found a new one. And I lived with other people for free until then. I surprised myself with how good at mooching and stretching a dollar and using my connections to find a new job/gig/whatever I am.

    Reply
  3. Gen Y says

    June 16, 2013 at 2:05 pm

    I current have a ton of student debt, and I just don’t think EF is my priority right now. So I consider the 1.5K I keep in my chequing account to waive bank fees my EF.

    Reply
  4. Gajizmo says

    June 16, 2013 at 3:32 pm

    Considering there are no new big algorithm updates coming up for a few months, your blog’s income is clear. And since you’ve survived so many in the past, there is no reason to think anything would have a significant impact on your current earnings. And like you said, your job is stable. I would use 100% of the cash earning from your blog to just pay off any debt you have, excluding your mortgage. Considering you are in a high tax bracket, you need every deduction you can get.

    Reply
  5. KC @ genxfinance says

    June 17, 2013 at 12:30 am

    I’d probably save for an emergency fund just to have a little peace of mind. I doesn’t have to be much so that I can still continue paying my debt. but I also agree that it may be a personal choice. Others would feel better if they can ay their debt first.

    Reply
  6. Simon Halls says

    June 17, 2013 at 9:16 am

    I do believe that paying off debt is always the best way to utilise spare funds or emergency funds. Within reason of course… do set something aside for emergencies.

    Firstly, paying off debt is a great mindset to get into and secondly, you’ll be extremely glad that debts are at a minimum when in retirement.

    Reply
  7. Julie says

    June 17, 2013 at 2:35 pm

    As someone of the “be prepared” mindset, my advice is save for an emergency fund first, then pay off debt…although when we had huge amount of debt ($50K) we didn’t have much of an emergency fund because all our money went to keeping our head above water. So I totally get how it might be difficult to save an emergency fund when you are in debt.

    Now that we are debt free, we keep an emergency fund of 1-year of living expenses. More than the recommended amount but we’ve been noticing that it can take people longer to find a job and the last thing we want is to go back to being in huge debt. No way!

    Reply
  8. David Smith @ PBC says

    June 17, 2013 at 8:13 pm

    What does the emergency fund really cover? Hospitalization perhaps or some form of expenses which is really very important. Well, the amount that should be in our fund actually depends on us. the important things is to have money earmarked for such contingencies.

    Reply
  9. Ashley @ Saving Money in your Twenties says

    June 17, 2013 at 8:20 pm

    I work for the federal government and my job is fairly stable (knock on wood) so I’m not too worried about losing my job. So I only keep a couple months of living expenses- the bare bones minimum living expenses- in my emergency fund. I want to build it up a bit more for those “just in case” moments, though 🙂

    Whatever makes you feel comfortable is the right answer. My boyfriend just paid off the rest of his student loan and almost wiped out all his accounts in the process. Instead of being super excited about being done with loan repayments, now he’s a little nervous about his low cash balance! Not exactly the feelings you want to have after making that last payment… 😉

    Reply
  10. jim says

    June 17, 2013 at 9:17 pm

    Gosh, guys/gals. After reading this blog and the responses to it, I, frankly, am just shaking my head. Lose the over inflated EF and pay those damn bills off – now! Have a little faith. You’re young – if shit happens you’ll figure out a way to survive and once you’ve got those damn bills paid off, you’ll have more than enough for an EF. Seriously, has my generation scared you so badly that you’ve got no faith in yourselves, this country, whatever? Wow! If you had ANY idea of how “no EF” prior generations lived with, you’d probably seriously stroke out. Suck it up – trust a little. Lose the damn debt – now! And you’ll be fine.

    Reply
  11. Becky says

    June 20, 2013 at 1:20 am

    I am just getting started on budgeting and getting our family finances in better shape, thanks to a great book by Usiere Uko titled, “Practical Steps to Financial Freedom and Independence: Your Road Map to Exiting the Rat Race and Living Your Dreams-” it has changed our lives. I have really valued the comments made here and will ponder them to figure out what is best for my family… it is a tough decision. Thank you for putting your blog out here for people to be able to discuss and learn more about different financial situations.

    http://www.financialfreedominspiration.com/

    Reply
  12. thepotatohead says

    June 22, 2013 at 12:12 am

    I focused on paying off my credit card debt first, which I just finished at the end of may. Woot! I’m now building uo my emergency fund to at least 3 months worth of expenses. Once that’s reached I’m probably gonna focus everything at my other debts and use a snowball method.

    Reply
  13. Kelli says

    August 9, 2013 at 2:23 am

    We currently have $1200 in our EF. I recently started having 10% of my checks go into the EF, and we just broke $1000! I was very excited about that, but now I’m wondering… should anything in excess of $1000 go to credit card debt? I’m pretty embarrassed to say we currently have about $4k in credit card debt… never thought that would happen to me. Some of it is due to us paying for my husbands grad school, and we are waiting on student loans to pay for that portion (which of course is just more debt).

    I think what we’ve decided is to really start budgeting more and working harder to pay off the credit cards- we can afford to pay more than we have been, and probably decide to keep the EF at $1200 and use anything above for debt just for now. Hopefully we can knock it out in about 6 months. For some reason $1200 makes me feel a lot safer than $1000 🙂 After we are debt free we will want to increase it to about $6000, but that might be awhile since I’m about to go back to school as well. It’s quite stressful to me, but my husband is always reminding me that when we are both out of school we will be making a LOT more money and should be able to pay the loans off quickly (I know for a fact people like Dave Ramsey would not approve of that mentality, but we think it’s a pretty safe risk considering our careers).

    Reply
  14. lolobunny says

    February 20, 2016 at 11:18 pm

    We have been prioritizing debt repayment, but we still contribute semi-monthly to our emergency fund for unexpected surprises. We are trying to eliminate some of our monthly expenses so we can put more towards our savings.

    Reply
« Older Comments

Trackbacks

  1. Principled Money Posts #45: orange, black and blue : The Money Principle says:
    April 22, 2014 at 9:24 am

    […] at Making Sense of Cents asked an interesting and contentious questions about the choice between keeping an emergency fund or paying off debt. I find this one fascination because it tangles different aspects of our lives. For instance, is we […]

    Reply
  2. The Evolution of My Emergency Fund – Making Sense Of Cents says:
    December 8, 2014 at 2:05 am

    […] didn’t have an emergency fund in University. Money was tight, and I was more concerned about having enough money for rent, than I […]

    Reply
  3. Ann-Notated: Emergency Fund vs. Debt Repayment ~ Annie and Everything says:
    March 2, 2016 at 9:33 am

    […] Emergency Fund or Pay Off Debt? — Michelle at Making Sense of Cents is not comfortable without an emergency fund that is large enough to cover the possibility of several emergencies happening at once.  But she opens the question up for readers to answer, so don’t neglect the comments. […]

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *


Hello and welcome!
My name is Michelle and I'm the author/owner of Making Sense of Cents. Learning how to save money and make more money changed my life. It allowed me to pay off $40,000 in student loans, start my own business, and I now travel full-time.
Follow on Bloglovin

Subscribe Via Email

As Seen On

Subscribe Via Email

HOME
DISCLAIMER
CONTACT

POPULAR POSTS
How To Make Money Blogging
How To Start A WordPress Blog On Bluehost
How I Paid Off $40K In Student Loans By 24
75 Ways To Make Extra Money
Please note that Making Sense of Cents has financial relationships with certain merchants mentioned. While all attempts are made to present correct information, it may not be appropriate for your specific circumstances and information may become outdated. Copyright © 2018. All Rights Reserved.

© 2018 Making Sense of Cents
Design by Olive & Ivy Design