Paying Off Debt vs. Saving Money First
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Debt is often a big hurdle to get over before you start truly saving money. If your debt is charging you 15% interest, and you don’t have much cash left over after your expenses, it’s easy to see why saving money can be a difficult task.
When deciding whether you should start saving money or paying down debt first, focus on paying off any high-interest credit card debt. If you can cover more than the minimum payment, that would be ideal.
It’s also important to tackle both high-interest-rate debt and to contribute to an emergency find simultaneously, so that when an emergency does happen, you don’t have to rely on taking on more debt to fund that emergency or unexpected life event.
Store even $25 per month to begin establishing some emergency funds so you don’t have to depend on using your credit card for all emergencies. Ideally, a better approach would be consolidating your debt into a lower interest rate card or 0% balance transfer to help lower the payments and interest, allowing you to save more.
Low-interest debt can be worth paying off slowly so you can get started with putting money away with the potential to compound over the long-term for your retirement.
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