Made an extra money, should I set up an emergency fund or pay down more debt

Welp, between a bunch of ebay auctions, an upcoming gigantic garage sale and our economic stimulus check we should hopefully have close to $3000 extra to put towards debt. In my mind, putting every cent we can towards debt is what its all about right now. We save money where possible and hopefully will not have any emergencies to where we need a bunch of cash right away for anything.

Which brings me to my quandry… should I put $1000.00 of that extra money into a savings account and have it for an emergency fund in case of XYZ emergency? Or… should I put it towards paying off our siding loan even quicker, putting us that much further ahead? Hmmm….

I can see both sides to this. My feelings have always been that in case of emergencies I could use the plastic since we don’t have any plastic debt and that is not a problem for us anymore. Even if we did have to take a month or three to pay off said emergency, our APR on plastic is lower than some of our other loans. Plus, if I put it on plastic I get cashback bonuses on my card and most emergencies we could have paid in a month or two anyway. This way if there is no emergency, I have saved 1000 plus the exponential savings of the interest stacking up at 10%.

But then I read about Dave Ramsey and all the other guru’s that say having a fund is key to success, it is vital to have. I can see the mental factor for just having that stability of an emergency fund.

UGH… what is a guy to do… I would love to know your opinions on this.

Comments {3}

{3} Comments

  • 05.07.08 Rob

    $1000 Emergency Fund is insurance against not having to jack up credit cards due to emergencies.

    Remember most people don’t “decide” to be broke, its the end state of a million small decisions.

  • 05.07.08 madsow

    Yeah, I guess I see that… I just have a hard time putting 1000 dollars into a savings account while being charged up the ying yang for interest on everything else. But you are right, I could loose my job and be broke tomorrow, you just never know.

    Thanks for the comment.

  • 12.30.08 Mark V.

    I am a Dave fan so I have to say the $1000 emergency fund is important. It gives you some peace of mind and stops you from having to create future debt. Good Luck!