Pay off Credit Cards VS Build Emergency Fund Savings – Me VS Suze Orman

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Recently I had a bit of a “tweet off” with Suze Orman because of a slight breakdown in communication between Suze, my wife, and myself…

What Happened?

Now that we are a one car family at least temporarily — my wife takes me to & picks me up from work when…  a). I stay up too late blogging.  OR  b). I’m too lazy to ride my bike.  One or the other happens most days!

On our way home the other day she mentioned how she had been watching Suze Orman on Oprah (via our free over-the-air HD digital TV signal since I refuse to pay for television anymore) and was wondering if we were following the specific financial advice Suze was offering that day.  Despite being swayed by the advice Miss Orman was offering, Mrs. Jabs was not able to accurately relay the information to me exactly as she had heard it from the boob tube — probably more my fault than hers since I have been know to be a bad listener from time to time.

Here’s what my wife was trying to tell me, based on advice from Suze:

We should be focusing on building our Emergency Fund savings (and other savings for that matter) before paying off all our credit card debt because…

  1. If you have an emergency, you will have money saved to take care of your needs and will not have to go further into credit card debt.
  2. Many banks are closing your credit cards if you pay them off and discontinue use; so if you pay them all off & have no Emergency Fund built up, then you have NO way to pay for your emergency… not even with a card.

Here’s the way I was interpreting what she was telling me, based on advice from Suze:

We should be retaining at least part of our credit card debt so that the banks don’t shut off our cards.

As you can see there was a miscommunication from the time the information left Suze’s mouth, came through the tube, entered into my wife’s ears, proceeded to be processed through her brain, marinated awhile, passed on to my ears, was processed through what I like to call “my ingenious mind”, then was finally realized as I sat there in the passenger seat on the way home shaking my head in disagreement.

What Did I Do?

I did what any self-respecting personal finance blogger would do… I tweeted Suze Orman!  Here’s how it went down:

As you can see, we were able to resolve our differences… which I’m sure left Suze very relieved!

So What’s The Answer

As you know there is never one right answer for everybody in every situation, however… I’m going to take a crack at it!  Although I do not agree with Suze Orman on all her teaching points, we do agree on the subject of building your emergency fund; but I am going to throw in one additional piece of advice…

In most situations reaching a healthy balance is the name of the game, and the subject of Emergency Funds and Credit Card Debt Reduction is no different.  Based on this precept of proper balance, my wife & I have committed to focus our financial efforts on both.

We attack our credit card debt by focusing 75% of our available funds toward it.  We also strike a balance that works for us by putting 25% into Emergency Fund savings. This way we are simultaneously, and comfortably reducing our high interest debt and building our savings safety net.

What Do You Think?

What works for you?  Do you put all your eggs in either basket… or do you balance your eggs by spreading them out in different baskets so if you drop your one basket you’ll still have another basketful eat for breakfast?



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