Pay debt first or save?

I have seen different schools of thought on this issue. Currently I have credit card debt of $1700 at 4.75%. I also am trying to start an emergency fund-I have $500 so far. Currently I pay $300 a month to the credit card. I am selling some things currently that will net me about $1000. Should I go ahead and use this money to pay off the credit card? Or should it go to the emergency fund? Dave Ramsey says to get the emergency fund first ($1000), then pay off the debt. But other financial advisors say to 'pay yourself first with savings'-3 to 6 months of expenses, then pay off debt. What do you guys think?

Separate ur money to two portion
Save some and pay debt some..
Save ur money and use it as your capital to earn money at the time..
Pay the debt by installment so that it may not cause u terrible pressure..
By the time u finished paying ur debt, u may have ur own business with the capital that u invest !

Pay down your debt first. The interest you pay is greater than the interest you will receive on a savings account.

You are literary a day away from being debt free, seriously!Here's the math I'd do if I were you.... Debt is $1700....you are selling stuff that will net you $1000, has $500 in an emergency fund and the $300 you will pay your cc this month. Cash on hand will be $1,800....debt is $1,700. I'd close my eyes, pay off the cc completely and put the $100 in the emergency fund. Going forward $300 would go towards the emergency fund and in 3 mths you will have your $1,000 in the bank....even sooner since you didn't give a breakdown of how much you put towards your emergency fund per month. Your cc at zero balance will serve as your emergency fund in the interim of you having some money in the bank.

Believe me you will be so relieved once you pay off that cc...whereas if you decide to continue saving you will only prolong the agony of looking at your cc balance. Just DONT go out partying on your cc. Lock it up somewhere far far far away.

You are $1,700 in debt and that sounds like a ton but I'm sure that you can knock this out in no time just by having a plan and getting a temporary part time job to help yourself out of this hole. Here is a plan. If you work the plan, the plan works for you:
1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an "emergency fund" category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don't even have to worry about it. You must cut your spending and live on less than you make.

2. First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on.

3. Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:

To start :
Debt #1 (highest interest): minimum payment+ extra payment
Debt #2 (middle interest): minimum payment
Debt #3(lowest interest): minimum payment

Debt #1: paid off
Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment
Debt #3: minimum payment

Debt #1: paid off
Debt #2: paid off
Debt #3:Mimimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.

That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have.

4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.

5a. When you have your emergency fund in place, add a category for "fun" to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.

5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. You employer probably matches at least part of your contribution so why give up free money. Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.

PAY OFF DEBT, THEN SAVE! You can never actually save if you have debt building up!!

Keep the 500 as your emergency fund, pay off the debt as fast as you can with all other money. Once that is finished start building your 3-6 months take home pay emergency fund. Once the debt is paid off you will have more cash to build the savings very quickly.

Dave Ramsey sometimes recommends a 500 dollar emergency fund for students and people just starting out.

Don't be concerned with interest rates between your savings and credit cards. This will only keep you in debt longer. Attack one problem at a time. Fucus all of your attention on one goal at a time. You will have more success this way. If your try to gradually pay off the debt while saving. You are likely to get discouraged and quit the plan all together or and emergency will happen and you will stop the plan.

Good Luck

Like our parents always say, all things in moderation. Id put into both a little at a time, that way you arent strapped but your fixing your debt and adding to savings simultaneously.

Get that emergency fund in place first. There's no sense paying down debt without it. What happens when an emergency comes along? You use the credit card then you're back to square one.

Pay off the debt. Considering you are already paying 300 per month towards the debt, paying it off now will allow you to put the $300.00 towards an emergency fund, then once that's achieved, put it towards savings. In about 3 months you'll have the emergency fund you want.

both....or call the Suze Orman show.

If your interest rate on the credit card is only 4.75% then you must know more about personal finance than anyone here, that's a great rate!
Given that a CD pays nearly half of that rate I would go with building the emergency fund. The Cash advance rates on credit cards are typically harsh. Just keep making those payments on the credit card.

I personally would pay off the debt. Even though the interest rate is pretty low, I would rather be debt free. Or pay down the debt lower and still have a little cash on hand.

The interest you pay on your debt is greater than the interest you could earn with the savings, so it makes more sense to pay off your debt first.
It also has the added benefit of giving you a better credit rating, making future loan needs more accessible.

I'd pay down the debt every month, while increasing your emergency fund. something like 80-20 respectively.

Once the debt is paid off, convert all previous debt payments into your emergency fund until you reach the goal of your desires.

Pay debt FIRST then use the credit card as the "emergency fund"

savings interests are low (even higher interest banks like ing are only paying about 3%) so you are paying more interest on the debt than you'd earn on the savings. However, I'd split the money you have and put half toward the debt and half in savings. It is always nice to have actual cash in the bank just in case you need it - many situations wont allow you to pay using a credit card (for example it would be rare for rent to be paid using credit) and to take a cash advance on a credit card can often put you into a very high interest situation.

I would definitly pay off the debt! Than work into not having to get into debt anymore and you can start saving. What good is an emergency fund if your in debt.

Yeah pay debt first, alittle into debt and into savings is not the best choice just pay as much as possible to debt due to interest thay make less money off you that way and you pay less money.

Pay off the debt. The interest is just money out the window. Why give it to a credit card company when you can put it in a savings acct?

Here's a simple way to decide - compare the cost of the debt (the exponentially growing interest added to the debt) to the benefit of the savings (the exponentially growing interest added to the savings). Which is larger in the long run?

Few savings account can guarantee the same amount of interest that your credit card company will for sure charge you. So, for the same amount of money, you can't earn faster than you'll owe. It's up to you if you want to risk the higher returns of the stock market instead of the securing the guaranteed reduction in debt.

An emergency fund is a great and vital thing to have. But deciding between the emergency fund and the debt depends on the size of the debt, and the reliability of your income, and your dependents and commitments. If you don't have anyone depending on your income, and that income is pretty steady, then the emergency fund isn't as immediate as the debt. Remember, the "other financial advisors" are essentially suggesting the same thing as David Ramsey - that 3-6 months of expenses IS the same thing as an emergency fund. David Ramsey, David Bach, and Suze Orman pretty much all recommend the same advice, and they are pretty dependable.

Remember, the debt is constant, and constantly growing. Everything else is a variable. So in my opinion, it would be better to take care of the problem you KNOW you have, rather than take care of a potential problem you MIGHT have one day. If it makes you feel better, put 25% of the payment into the savings and 75% towards the debt, so you can make progress towards both goals.

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