[b4freedom]

Hypothetically and in your opinion, what is more important: having an emergency fund of $20k and $20k in debt or zero debt and no emergency fund?

Let’s assume that I have a student loan for $20k at 5% for 20 years. I can pay an extra $1000 a month for the next 20 months, or I can put the $1000/month into an emergency fund account earning 5%. There are no other missing facts to the equations and it’s all or nothing, you can’t split it and pay ½ towards a loan and ½ towards savings. What would you do?

If there is a huge disaster or emergency are you going to wish you had the $20k to get you out of the situation and would you be less worried about that monthly student loan payment?

If you didn’t have the $20k, would you have to take on more debt (credit cards) to get you out of the situation?

Do you think it’s better to just get out of debt first and then save for an emergency fund?

What if the rates changed? What if it was credit card debt and the rate was 18%. At what rate would you change your mind to eliminate the debt before saving for an emergency?