Question 13
Managing both high-interest debt and emergency savings is a common trade-off. Many advisors recommend a two-step approach for households carrying credit card debt: first, build a small starter emergency fund (often $500–$1,000) so you won’t rely on cards for short-term shocks; second, aggressively pay down the high-interest debt because its carrying cost usually exceeds any safe savings return. Once high-rate debt is reduced, you can shift back to building the full 3–6 month cushion. This strategy balances protection against new emergencies with minimizing wasted interest expense.
If you have a high-interest credit card balance, which is generally the recommended first step?
Did You Also Know...
By Wise Wallet
Low expense ratios compound into materially larger ending balances over decades, so fees are one of the few things investors can control.