As you begin your quest to pay off debt and bad credit loans, you should first create a “nest egg” or emergency fund. There are many different opinions concerning how much you should have in your emergency fund. Some say $1,000 and others suggest higher amounts. What you should consider is how much it takes for you to live on each month and also what it would take to sustain your household if for some reason you didn’t have an income.
Most people think they’ll be okay, but you never know when you might have a loss of job, fall sick, or a family member falls sick and you are required to travel or take time off of work. These are things that we don’t like to think about, but it is necessary to consider these things when coming up with an amount for your emergency fund.
After you have created your “nest egg” it is time to tackle your debt. You have two different approaches to consider: highest interest rate or smallest amount. In the long run, you will pay less by tackling the highest interest rates first. For short term feeling of accomplishment, the smallest amount works best. For me, I prefer to tackle the smallest amount first which gives me the double pleasure of quicker reward as well as removing one payment from my list of monthly debts.