[...] rate reductions on their credit accounts. They made plans for things that couldgo wrong by having emergency funds and proper insurance. They stayed true to their friend and helped him [...]

http://www.dontfeedthealligators.com/blog/invest-or-pay-down-low-interest-debt

It’s important to save money AND pay off debt at the same time. It takes longer but at the end you have a nice emergency fund which will keep you out of debt.

couldn’t agree with you more, my wife and I have always been good at paying off debt (and running it back up again) but terrible at savings. It’s the lack of savings that has always gotten us in trouble, we’ve never been good at having money in the bank. that is slowly changing, we’ve set a goal up of saving money over the summer and keeping it. We’ve had some savings but I usually had to draw it down to pay a bill or something.

BTW dana like the name of your blog!

The whole point of a savings account is to put something aside in case of emergency. No matter what your debt status, you NEED to do that. If you have a bunch of debt and suddenly a kid throws a rock through your car window, you are better off paying for the replacement with cash than adding yet more debt to your credit card that you are busily paying off in the first place.

I would go so far as to say that if you are making so little income that all your debt accounts are going into collections, you might as well squirrel away what little surplus you might have rather than tying it all up in debt payments because if it’s foolish to run up more debt when your accounts are current, it’s *impossible* to run up more debt when you can’t even afford to make minimum payments, and then you really *will* be stuck if your hot water heater goes splut or you need a hundred bucks for an urgent care visit. You can’t hope to pay off all your debts if you can’t even function because you can’t take care of yourself in an emergency.

Let me be clear that I absolutely agree we have an obligation to pay off our debts and that it is best to not get into debt in the first place, but we are speaking here from the assumption that the debt already exists. Murphy is not going to politely sit by and wait if you’ve got debt; he’s going to go right ahead and smack you.

I would say that as a rule of thumb, go ahead and put aside that $500 to $1000 right off, as soon as possible, before you get into serious debt repayment, and then do repayment and emergency funding about 50/50 until you get three to six months’ worth of expenses put by. After that, by all means throw it all at the debt. But don’t leave yourself without that cushion. Not having savings is exactly why so many Americans rack up debt to begin with (whether that’s emergency savings, saving money for gizmos and gadgets, or what have you).