Should You Build an Emergency Fund or Pay Off Debt?

Emergency Fund Vs Paying Off Debt: Which One Should You Choose?

What to Consider When Deciding Between Emergency Funds and Paying Off Debt?

When Should You Start Building Emergency Funds?

FAQs about Emergency Funds Vs Paying Off Debt

How to maintain an Emergency fund when you already have credit card debt?

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Although it makes sense to pay off your "bad debts" like credit cards which carry higher interest rates, you will be drowned in more debts in immediate expenses if you do not save for emergency funds. In this case, you should pay a little more than the minimum on credit cards and save for an emergency fund.

Should I pay off my credit cards or build an emergency fund first?

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Credit card debts carry higher interest rates, and you must pay compound interest for a long time if you continue paying the minimum amount each month. The best practice is to prioritise paying down significant debt while contributing small amounts to your emergency fund.

Which debt should I pay off first?

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You should start paying off the small debts with the highest interest rates if you have multiple debts.

How does life insurance fit into clearing debt?

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Life insurance ensures that your family isn’t financially burdened if something happens to you. If you pass away while still in debt, your family might struggle to pay off loans, but a good life insurance plan can cover outstanding loans and living expenses for your loved ones.

 

I have a home loan. Should I focus on repaying it or getting term insurance first?

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Term insurance should be your priority. If something happens to you, the home loan will not disappear, and your family might have to bear the burden. A term plan can cover the home loan, ensuring they don’t lose the house.

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