Emergency Fund — Backbone of Personal Finance?


I’ve struggled a little with the idea of accumulating an emergency backup fund, especially when we still have high APR credit card debt with big balances (>$20k).

I was schooled in a pay-off-your-debts-before-doing-any-investing philosophy. I think the key is that this emergency buffer is part of the debt-reduction strategy. This post at Debt Free Forever helped me to make sense of the concept.

Now I believe an emergency fund is a crucial component to getting debt-free. Of course there’s a trade off. You should be aggressively paying off your credit cards. But part of the pure evil of credit card debt is those unexpected expenses that you don’t have any cash for. Recently with us it was the car, more than $2000. Now, it’s hard to predict, but I do believe that a couple of these bunker-busting expenses can outstrip your ability to make meaningful dents on your credit card debt.

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2 Responses to “Emergency Fund — Backbone of Personal Finance?”

  1. debtfreeforlife Says:

    I’m glad I could help. I’m still wrestling with this myself — and I found out in April just how much having an emergency fund would have helped me when I had to travel out of state so unexpectedly.

  2. noma Says:

    Well, thanks again. We are way gung ho on our emergency fund. It’s like a new pet that I want to feed regularly!

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