People often wonder whether they should save up an emergency fund or pay off debt first. It can be hard to know what to do when you’ve got competing priorities, so that’s a common question.
The answer is pretty simple at first glance: everyone absolutely needs an emergency fund, so build a baby emergency fund before focusing on debt reduction. Of course, you’ll want to be sure to continue making the required minimum payments on your debt while doing so.
But there are some other details to consider, like “how much should my emergency fund be?” and other common questions. Let’s start by talking briefly about the different levels of both emergency funds and debts.