Rob wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

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“Dear Steve,

I read an article that said if you want to pay down your debt quickly, it is ridiculous to try to save money at the same time . You should put all available funds into debt reduction so that you can snowball your payments and get out of debt faster.

The conventional wisdom is to build your emergency fund up as you pay down your debt. That way you don’t have to pull out the plastic when an unexpected bill arrives. I agree with this strategy because my personal experience has been that you keep getting thrown back into the debt cycle without an emergency fund. In fact, I think an emergency fund is the core to all sound financial planning. Using credit cards for those unexpected bills is the surest way to be shackled into a life of debt slavery.

What is a better strategy, to focus all available funds into debt reduction or to build an emergency fund at the same time?

Rob”

The Answer:

Dear Rob,

Thank you so much for sending in your question. Really!

I agree with your approach Rob, if you simply throw all available money at reducing the debt an unexpected event will catch you unprepared and in order to pay for it you’ll just use the plastic again. This strategy is the all or nothing approach which isn’t smart nor logical.

I much prefer to see people open a boring old savings account and start paying themselves first. It might be $50 or $100, but put that away first and then use remaining dollars to pay down your debt using the debt snowball approach.

Most people set themselves up for failure by overreacting and punishing themselves by sending every penny to the creditors. That approach is not safe, nor is it sustainable over the long period of time it takes to dig yourself out of the debt trap.

Trust you gut Rob, you’ve got the right idea here. Heck, i should have asked you to write the answer. LOL.

Steve