It seems like Suze Orman has been telling the masses 4evah to pay down credit cards and THEN work on building up your savings. Sound advice…usually…except that the recent credit crunch has credit card companies changing their ways. Suze’s advice was based on people being able to use some of their newly freed up credit as part of their emergency fund…But times have changed and now credit card companies are slashing credit limits and closing cards left and right even if you’ve always been on time and have done everything right. So Suze has changed her tune. NOW she says you should pay your minimum payment and put EVERYTHING else towards an 8 month emergency fund. Once you’ve reached your 8 month savings goal, THEN you can make paying your credit cards your number one priority again…start with the highest interest rate, put a little more towards that one…then when you’re done with that one, roll what you were paying per month towards that card onto the next and so on.
I’m happy to see she’s reversed her stance. It is an interesting and subtle change but it can make all the difference in the world for people in crisis. I have LOADS of student loan debt and if I hadn’t put some savings away, I’d be up shits creek sans paddle right now. And don’t forget-you can’t always count on unemployment…there are a number of factors that could exclude you from unemployment benefits. Unemployment benefits differ from state to state so check your local benefits office to find out what you need to do to qualify.