Conventional debt-free wisdom tells us to build a small emergency fund before paying off debt and then after we're debt free to build a bigger fund. I think that might be backward.

You know I am all about doing things in the order that feels right for you. Because I believe there is no right way to pay off debt. However, today I am going to give you a few reasons you might want to prioritize a bigger emergency fund before you begin your debt payoff.

Here are a few reasons why:

Protects you from financial emergencies

An emergency fund can help you cover unexpected expenses such as-

a medical emergency
car repair
job loss.
If you don't have an emergency fund, you may need to turn to credit cards or other high-interest loans to cover these expenses, which can make your debt situation worse.

Provides peace of mind

Knowing that you have a financial safety net can help reduce stress and anxiety. It can also help you feel more confident in your ability to handle unexpected situations.

Helps break the cycle of debt

If you focus solely on paying off debt without building an emergency fund, you may end up in a cycle of using credit cards to cover unexpected expenses. This can make it difficult to make progress on your debt and can keep you in debt longer.

Provides flexibility

Having an emergency fund gives you the flexibility to handle unexpected expenses without disrupting your life. For example, if you have an emergency, you can use your emergency fund to cover the expense without needing to divert money from your bills or debt payments.

That said, it's still important to make at least the minimum payments on your debt while building your emergency fund. Once you have a 3-6 month emergency fund in place, you can shift your focus to paying off debt more aggressively.

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