Why I'm still paying off debt instead of building an emergency fund - Business Insider

series. The idea is that having an emergency fund can break the reliance on credit cards.

But, I've always felt in control of my credit card use. Like the decision to spend on the renovation projects, most of my credit card swiping comes after careful consideration. I'm not someone who recklessly spends, so I didn't need the emotional control of avoiding credit cards at all costs. In my mind, it made much more sense to avoid paying interest. I would rather pay $1,000 toward credit card debt and save money every month on interest than have it collecting minimal interest in a savings account. Plus, in a real emergency, I could use my credit cards and then create a plan to quickly pay them down. Now that our home projects are done, I sat down to crunch the numbers.

But, the minimum monthly payment on the debt we racked up during the renovations is substantial: about $200 a month. A significant chunk of that is interest. By prioritizing payoff, I can reduce our outgoing expenses and save money on interest. Both of those ideas make lots of sense to me at a time when we're tightening our purse strings. During this economic crisis, I'm doing my best to carefully budget my income.

Of course, in an ideal world I would be able to handle financial challenges with cash on hand, but for now I would rather that cash be working to reduce my overall debt, and to improve my financial security for the future.

'I'll be honest: Even before this financial crisis, it never made sense to me to build an emergency fund while having high-interest debt.' I guess the author now knows that funding your life with high-interest debt isn't as smart as living within your means?

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