Photo by: Paul Keleher

Saving money while still in debt may seem like a silly idea. Why not put that money towards debt and lower your money paid to interest? But on my journey to debt-free living, I’ve found that almost everyone suggests setting up an emergency fund—even if you’re in a lot of debt.

The logic is that if you are unlucky enough to be laid off, have an accident or fall victim to a natural disaster, you spend your money and not a credit card, line of credit or anything else that will charge you interest. Instead of paying $800+19% interest/month to get your car fixed, you’re just paying $800.

At first, I was tempted to put $1000 into my credit card debt instead of setting up an emergency fund. But the more I read about other people’s debt, the more I realized that many of these people started out in a little bit of debt like me. But then they found themselves without a job or had a medical emergency. They didn’t have an income or an emergency fund to pay for living expenses. Instead of being in $20,000 of debt, they soon found themselves with a mountain of $100,000 or more debt to pay off.

I didn’t want fall into that trap so I deposited my tax return into a high-interest savings account at my bank. I know it’s not much and I admit I’m having difficulty following my budget these days, but It’s comforting to know that there’s money in the bank in case of emergency.

Lesson learned: No matter what, have an emergency fund for those unpredictable situations. You never know what will happen.