From what I’ve read, the popular opinion is to follow Dave Ramsey’s baby steps, save the $1,000 emergency fund first, and then pay down debt.
This has been a constant stressor for me as we are in debt due to a lack of savings, and I am worried the cycle will keep repeating. Is there an amount you recommend having in savings before paying down debt? I’ve thought about $2,000-$2,500 that would make me feel a little better, as we do not have an emergency credit card or anything else to fall back on at this time.
If possible, start with $1k in your emergency fund, then focus on debt. I tackled high-interest debt first, then built a 3-month fund. It eases my anxiety, so I prioritized it.
That’s kind of where I’m at mentally as well. I’m so anxious and stressed without an emergency fund but also need some breathing room, and would like to clear out some debt. I’ve considered trying to put $2,000 in our emergency fund first and then trying to tackle the lower debts with high interest and snowballing into the larger ones.
Some might disagree, but do what helps you sleep at night. If that’s saving an emergency fund first, go for it. I’m saving 3 months, paying off debt, then saving 6 months total. If debt is too high, focus on that first to free up income for savings.
Ramsey’s plan is good as a template, but you should take some things he says with a grain of salt. You’re right to be concerned about a $1k emergency fund. If he took inflation into account, that first baby step would easily call for $3k. Split the difference. Save up $1k-$2k, and then pay down debt.