In past years, financial experts such as Suze Orman have encouraged people to pay off their credit card debt as a top priority. It was considered foolish to put extra money into a savings account earning 5%, when you have a credit card debt costing you 19%. Well times have changed.Due to the volatile nature of the current economy, people are finding it much more advantageous to pay the minimum on their credit cards, and instead build up their emergency fund. Having a paid off credit card, and no emergency saving, does not provide the liquidity necessary to survive a lay-off. With the unemployment rate reaching 8.5 in March [NPR.org], I don't blame them.
I believe the number one priority should be to have an emergency fund, then focus on credit cards. The size of an adequate emergency fund depends on your job stability, dependents, and asset portfolio. A sufficient emergency fund can range from $1000 to a 1 year's salary [Getrichslowly.org]. It all depends on your personal comfort level. If don't have kids, I would still recommend having at least 1 months salary before paying more than the minimum on your credit cards in today's economy.
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2 comments:
"Emergency Fund Before Credit Card Debt" has some great information. I am using Direct Credit Solutions to lower my debt. What other credit card debt solutions would you suggest.
Due to the volatile nature of the current economy, people are finding it much more advantageous to pay the minimum on their credit cards, and instead build up their emergency fund.
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