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Which should I worry about first? Paying off our debts or building an emergency fund?
Our situation: DH and I are both full time students. We do side jobs to make ends meet, but are surviving largely on grants and student loans (I know.... bad idea).
Our savings: ZERO
Our debt is not HUGE, but I want to eliminate it, because we are in school and eventually the student loans we've taken in the past are going to come due.
Well your husband is right to an extent as an emergency fund isn't considered savings. But typically $1,000-$2,000 is recommended in an emergency fund, then pay off your debt, then start saving up 6-12 months worth of bills to have in cash in the bank. Typically.
I agree with Meghan, that is what we have done. We have an emergency fund (not savings) for when stuff hits the fan, car accident deductible stuff like that. Now we are just working to pay off the credit cards. I actually just redid our budget since so much changed with the new baby, new daycare, pay raises and such. I am glad I redid it too. I would sit down write out all your bills and try to make a realistic budget.
Make sure you are paying what's due each month, but before paying additional money to get the loans takin care of you really ought to have an emergency fund. The point to this is so that if you lose a job, car breaks down, end up in the hospital.. Whatever it may be you want to be financially able to survive it. Paying off debt is important for sure, but its best to first have an emergency fund. And I agree with the above, an emergency fund is strictly for emergencies. It is not the same as a savings account that you can spend on school books, or take out, or furniture. It is strictly emergency purposed money only. I would start out with having an emergency fund big enough to carry you for two months should anything drastic happen to you. And then later on once you have paid off debt, you can always come back to the fund and add to it securing you further.
I say...both. But! The debts aren't going anywhere, so why not still set some money aside for emergencies. Even a small amount monthly can add up. When you do start paying off debts, try to get the smallest ones out of the way. Then try to set up a different payment plan with your student loans. That way the payments don't turn into a huge burden.