Orman: Emergency Fund More Imortant Than Credit Card

In helping consumers with her advise on how to manage debt, Suze Orman says save for an eight-month emergency fund. "Listen, everybody: If you do not have at least an eight-month emergency fund, and you think there's a probability you could loose your job — and it's not just losing your job; you could be in a car accident, get sick — continue to pay the minimum on your credit card every month. Everything beyond that needs to go to establish an emergency fund. And if you have an emergency fund saved, then fund your retirement account before paying down credit card debt."

To the question if you should pay off credit card debt or save for children's college she says pay off credit card debt. It's more important than your child's college payment concern, which is years away.

Q: Pay off credit card debt or pay off student loan debt?
A: Both

Q: Invest in retirement or save for children's college?
A: Invest in retirement

Q: Invest in 401(k) that employer matches or pay off credit card debt?
A: Invest in 401(k) that matches

Q: Invest in 401(k) that does not match or pay off credit card debt?
A: Pay off credit card debt

The bottom line is that first make sure you have eight month emergency fund. This is prioritized vs credit card debt payment. Then make sure you pay your credit card debt. The rest comes after you have successfully met these two points, tells Suze Orman.