It is very important to have a cash emergency fund of some reasonable sum before using all extra money to attack debt. There are different schools of thought on the best way to pay off the debt, but attacking it in any fashion as long as you stick to a plan will work. But you have to have that cash back up to keep from using debt when life happens.

Personally, I think the price of a transmission in my car is what the balance of my emergency fund should be, or a little more. The little more would be like the cost of an emergency room visit for an emergency that won’t require a hospital stay, but does require immediate treatment, like a broken bone or laceration.

I pick those because a transmission is one of the most expensive repairs or replacements that can happen to a car. If you don’t have enough cash to pay for it, you have to go into debt because you usually need your car to get to work. A medical emergency that requires ER care only will run anywhere from $500 – $1500. If you don’t have insurance or you have a high deductible, you need cash.

Sherri

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