Should I pay off debt or build an emergency fund first?
The decision depends heavily on your loan's interest rate and your current level of financial stability. Many people want to aggressively tackle their loans but hesitate, wondering if they should stockpile 8 to 12 months of savings first. However, eliminating massive debts removes significant financial worry and actually shrinks the size of the emergency fund you ultimately need.
What people tried
Every workaround mentioned in the threads below. We haven’t tested any of them — and nobody here is claiming they worked.
Found another way around this?
Share your steps and trade-offs so fellow engineers don't have to reinvent the wheel. No account required.
- 1Putting rental income towards loan payments and regular income toward savingsDid this help you?
- 2Focusing on the emotional comfort of eliminating debt versus mathematical efficiencyDid this help you?
- 3Holding a standard 6-month emergency fund while deciding on the next stepDid this help you?
- 4Planning to target the highest interest rate loans first if deciding to pay extraDid this help you?
In their words
Unedited, grouped by where they were said, most upvoted first within each place, each linked to the thread it came from.
“I want to start paying off our debt more aggressively, but I also wonder if we are people for whom it makes sense to have 8-12 months in emergency fund first.”source ↗
“I have recently started to feel like we’re financially stable enough to start making extra debt payments, but I’m curious for others’ thoughts because I’m pretty new to all of this.”source ↗
“I'd fully fund the emergency fund first.”source ↗
“What's the interest rate of the loan?”source ↗
“The funny thing about an emergency fund, it doesn't have to be as big if you don't have debt. I'm not saying $10k is enough, but would you feel the same "worry" if you didn't have a $110k loan floating out there?”source ↗
Where this came up
People with this problem also raised
- 5How much of my savings should I use for a down payment?
- 10Should I drain my savings to pay off a car loan?
- 10Should I build my emergency fund or invest first?
- 3Why does my emergency fund keep getting drained?
- 8Should I pay off the smallest debt first?
- 7Is it better to pay off credit card debt or keep cash in savings?