#CreditCardDebt #EmergencyFund #SavingTips #FinancialPeace
Hey there! 😊 I see you’re navigating some important decisions at just 22 – that’s awesome that you’re thinking about your financial future. With $6,000 in credit card debt and only $500 in savings, you’re definitely not alone in feeling the pressure to balance paying off debt and building an emergency fund.
Let’s break this down a bit!
Why is this a dilemma? 🤔
- High-interest credit card debt can weigh heavily on you. It often comes with high-interest rates, which means not only are you paying off the original debt, but you’re also chipping away at growing interest costs.
- An emergency fund is crucial! Life can throw unexpected curveballs, like car repairs or medical bills. Having that safety net of savings can prevent you from sliding deeper into debt when something unexpected happens.
So, what’s more important for you right now? Here are a few things to consider:
- Prioritize paying off high-interest debt: If your credit card interest rates are high, focusing on these payments can save you money in the long run.
- Start a small emergency fund: Even saving a little, like $50-100 a month, can help you feel more secure. Aiming for at least $1,000 can be a good starting point!
- Balance both needs: If possible, try to allocate funds toward both paying off debt and savings.
Here’s a possible solution: 💡
- Create a budget: With only $600 in monthly expenses, see if you can set aside a certain percentage of your income towards your debt, while also putting something away for savings. This way, you cover both bases!
Now, I’d love to hear from you all! What do you think is more critical for someone in a similar situation—getting rid of credit card debt or building a solid emergency fund? Share your thoughts, experiences, or tips in the comments! 💬
Remember, everyone’s journey is different, and what works best for you may not be the same for someone else. Let’s support each other in making informed financial decisions! 🌟
Pay minimum on all debts until you can built a small emergency fund (~$1-2k), then pay off the high interest (credit card) debt. This is covered in the prime directive linked in the sidebar.
Start by paying off the highest interest credit cards, credit card interest is simply throwing your money out the window. Don’t give me wrong. I use my credit card instead of an ATM when ever possible, but I pay it off every month. I do this for the 2% cash back.
if your credit card debt is normal interest rates like 20% or higher, then pay off the credit card debt first because that interest-earning debt is an emergency.
You’re probably paying over 20% interest on those cards, unless you’re in some kind of 0% promotional period. 20%+ debt is a literal financial emergency. Pay it off aggressively.
Are you living at home? Sounds like your parents are your emergency fund.
Pay off the high interest debt first.
Both paths are, in a general sense, largely the same but as your CC debt is accruing interest the entire time the longer it stays at a higher balance the more money it will cost you to pay it down. If you have an emergency that would require you to use your emergency fund, you’ll still be paying for it with your CC debt whether you’ve put money aside or not as every dollar you put aside for the emergency fund is a dollar of CC debt you aren’t paying off.
But assuming you don’t have a prolonged period where you keep having emergencies that don’t allow you to pay off your CC debt, regardless of the path you choose, and you stay the course and do pay off your debt, the path you do choose will only be a marginal difference. The real choice is in deciding to live within your means and pay off your debts and then, of course, being fortunate enough to be able to do so.
I would pay off credit cards asap with highest interest card first. Emergency fund is important, but assume you have a true emergency, car repair, doctor, etc. you can use a credit card that you have either paid down or are paying down IF it’s a true emergency. After getting those cards to zero, build up that fund asap.
Credit card debt, 100%. It’s good to have a cushion so you’re not always running up against a $0 checking account, but I’d say with $600 a month expenses you should never have more than $1000 in your account until your cards are paid off because you’re burning money on interest.
What is the interest rate on that cc debt?
Depending on how much you make, is there any opportunity to do both?
If the interest rates are insane like most are, definitely prioritize that, but nothing sucks more than finally paying all that off just in time to have another emergency and you…have to put it right back on a card again.
Not saying you need to save 3-6 months right now while also paying the card aggressively, but if you have the disposable income at the moment (with only 600 in mandatory expenses you should have something) it wouldn’t hurt to at least fluff a few hundred more in savings at the same time
Most people will say pay off the credit card first, I lived that life and would run into issues from a lack of emergency fund. I’d get the card paid off, or just about to pay it off, and boom large expensive medical bill or car repair.
My advice: double your monthly saving amount, than use whatever else you can to pay off the credit card. Once you get $3-4k in the emergency fund, pull back on the saving to maximize your credit card payoff. After the credit card is paid off, 60-80% of all the monthly money saved and credit card payment combined becomes you new emergency fund deposit. That continues until you have a minimum of 6 months, preferably 1 year, of expenses/salary in your emergency fund.
credit card debt is the emergency…
$1000 emergency fund then everything else thrown at your debt
Holding CC debt will destroy your financial future. Get out and stay out of consumer debt. Then worry about saving and investing.
I would do both but most would be going to pay off the credit card debt. Get your savings up to at least $2k and at that point put everything else into paying the credit card debt off.
To be clear, I would be putting most toward the CC debt even as you are building up your saving.