Are you struggling to decide between prioritising your debt repayments or building an Emergency Fund? Let me break it down for you: if you want to safeguard your long-term financial well-being, it’s crucial to focus on creating an Emergency Fund before tackling your debts. Here’s why: imagine you have €20K of debt and no savings. It makes the most sense to prioritise saving while making additional debt payments when possible. This way, unexpected expenses won’t create further financial issues down the road!

Building an Emergency Fund is the cornerstone of your personal financial plan. Aim to save at least 3-6 months’ worth of expenses, but feel free to go beyond that if it makes you more comfortable. The key is to start building that fund as soon as possible because life can be unpredictable. Just look at the unexpected impact of events like COVID-19. By saving just an extra €100 each month, you can have €1200 saved by the end of the year. As you build momentum month by month, you’ll soon have a 3-month fund ready to handle any unforeseen circumstances.

Instead of waiting to save at the end of the month, prioritise yourself first. Paying off your debts is necessary, but start by paying the minimum amount each month and focus on saving. Take a look at your routine expenses (aka the “Latte Factor”) and see where you can cut out unnecessary costs. By following these two steps, you can have a significant impact on your finances. Even if you can only save €10 or €50 per month, it’s still progress. The important thing is to develop the habit of saving and become a saver. As your comfort level grows, you can increase the amount you save automatically.

Paying off your debt first may seem appealing, but it can hinder your ability to build an Emergency Fund. What if an unexpected expense arises and takes precedence over debt repayment? It could be a medical issue, your children’s needs, or even a necessary household item. Prioritizing these expenses is crucial!

Keep in mind that once you put extra money towards your debts, you can’t retrieve it. So, always allocate a portion of your funds to your savings. Life can be unpredictable, and having that financial cushion is essential.

Start by creating your Emergency Fund. Having savings tucked away can provide a sense of security when faced with unexpected challenges. Unlike debts that can be paid gradually, one-time costs require immediate attention. It all comes down to having reserves on hand!

If you need assistance in building your Emergency Fund, the Money Coaching Hub is here for you at Willigness. We offer guidance, motivation, and support to help you make a difference in your financial life. Whether you’re looking to take control of your financial future, get organized, start saving, enhance your savings, invest, or learn budgeting, we’ve got you covered.

If you think that you can benefit from professional support on this issue you can reach out here.
Luca Caruana is a is a Certified Money Coach (CMC)® at Willingness and the Founder of the Money Coaching Hub. Luca can help you understand your story and improve your relationship with money. He can be contacted on or call us on 79291817.