Comments on: Liz Pulliam Weston vs. Suze Orman – Who’s Right?

By: Bill

Bill — Tue, 12 May 2009 19:04:19 +0000

Depends on the individual. Depending on the debt amount. If you can pay it off in a hurry or utilize a debt solution out there to help pay it off quicker, then i would say pay it off quick has you can. Stop paying those outlandish interest payments.

By: mbhunter

mbhunter — Thu, 07 May 2009 06:26:25 +0000

Suze’s spot on.

People should be padding their emergency accounts because this will buy them time in the event of a job loss. It doesn’t matter who you are; the risk of job loss is higher. It’s hard to pay the credit card bills at all without income or savings.

By: Andrea

Andrea — Wed, 06 May 2009 15:28:05 +0000

I have to agree with Suze. Easy for me to say. I have no credit card debt and a 24 month emergency fund.

By: sam

sam — Tue, 05 May 2009 17:09:57 +0000

I don’t see a big advantage either way. Pay down first – save first. My advice is to pick one way and do it. Doing it is better than worrying about a few bux of interest one way or another.

By: Kirk Kinder

Kirk Kinder — Mon, 04 May 2009 16:54:40 +0000

I still like paying off the credit card rather than saving. The savings accounts today pay so little while credit card companies are increasing their rates.

Every person is different, and we all have different “mental accounting” methods that make us feel warm and fuzzy with a safety or emergency fund. But, if you are ever to really get wealthy, you need to acknowledge your bad ideas and habits and change them. Keeping money in an account earning 1% while paying 11-18% interest is not smart. It may make you feel better, but it isn’t the optimal course of action. I am not saying don’t take that course, but just realize this safety blanket is costing you considerable amounts of money, especially if your credit card balance is large.

While money is an emotional topic, those who do the best act like Mr. Spock. They look at the most logical course of action.

By: David

David — Sun, 03 May 2009 10:50:12 +0000

I just can’t live without a safety net. I’d save about 3 months worth of living expenses first. Then I’d continue to save, but at a slower rate, and start putting more money toward the credit cards. Once I hit 6 months EF, I’d stop saving and put it all toward the CC. During this time, however, I would max out the 401k to the extent there was a company match.

By: Angarreq

Angarreq — Sat, 02 May 2009 19:57:00 +0000

We hedge by doing both (though aggressively weighted towards removing the debt). The mathematically optimal approach ERE suggests may omit probabilities of unforeseen circumstances, or the chance that a particular situation will not lend itself to the “put the emergency on the card” solution. Peace of mind comes at a small cost for us by pulling back from the optimal $$$-maximizing frontier curve.

By: Online Banking

Online Banking — Sat, 02 May 2009 12:18:00 +0000

I think that Dave Ramsey’s advice is excellent. Get your emergency fund to $1000 and then pay off your debt. A $1000 emergency fund will be enough to cover most unexpected expenses.

By: Jim

Jim — Fri, 01 May 2009 23:50:49 +0000

I agree with Moneymonk’s point that theres no ‘on size fits all’ answer. Early is also right that paying the debt first is optimal. Some sort of cash buffer is important. How large it should be depends on your individual financial situation and risks.

Suze’s advice is based on the fear that the credit card companies will cut credit limits and/or shut down accounts altogether. So if someone with CC debt hits an emergency they could be without any cash and then get their credit shut down as well. Also Suze wants people to have an 8-12 month emergency fund which is pretty large IMHO. Its a nice goal but maybe too large to be practical for many. You could spend years building such a surplus and by then the recession is over.

By: Early Retirement Extreme

Early Retirement Extreme — Fri, 01 May 2009 20:24:14 +0000

Ahh I see that the E-fund really has achieved a cult-status. The financially optimal answer is to pay off the credit card. If an emergency happens, put it on the credit card and keep paying it down. If an emergency does not happen, you did not pay interest on the credit card debt you could have paid down.