Should I Save Money or Pay Off Debt?

When we first started getting serious about money, budgeting and paying off debt, all the things we read got to be really overwhelming. The different books and articles we read would say things like, “Build up your savings.” “Get all your debts paid off.” “Don’t get behind on your bills!” “Don’t have a credit card.” It all felt so overwhelming that we weren’t really sure where to start. Even though we got the debt snowball rolling, and kept adding to our savings we weren’t really able to fully dedicate ourselves to our finances because we were getting pulled in so many directions without any real guidance or game plan. Then, when we started Financial Peace University, we were given the answer to our biggest question. Should we be saving money or paying off debt?

*This post contains affiliate links through which I may make a commission. All thoughts and opinions are my own. 

First: Start a budget to determine debt

In order to even know just how much you’re spending each month to pay off debt, it’s important that you sit down and make a solid budget if you haven’t already. I have an easy to follow budget available in my Fun Sized Budget Bundle as well as 17 other worksheets to help you start a savings and pay off debt. I also recommend taking advantage of some of my top budgeting posts:

Once you’ve taken a look at your budget, you’ll be able to easily see just how much you’re putting toward your debts, how much goes into savings and any extras you have. When looking for extra money in your budget be sure to pay attention to what you spend on the non-necessities of life. Things like daily coffee runs, alcohol, or takeout.

Now that you have an idea of just where your funds are going, let’s look at debt vs. savings.

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If you’re in debt

If you yourself are struggling to get out of debt and haven’t yet heard about the Snowball Method, you can read my post all about how we paid off $6,000 in just 6 months! If you are totally unsure of where to start I highly recommend following Dave Ramsey’s 7 Baby Steps as laid out in Financial Peace University. Another great idea is to check your FICO credit score to see where you stand credit wise.

Pay off debt

Having debt is just a life sucking pain in the tush. Let’s get down to the basics of why is really stinks:

  • You end up paying more the longer you have it.
  • It takes money away from you every month.
  • It can ruin your credit score.
  • Prevents you from living the life you want.
  • Prevents you from building a secure savings.

Dave Ramsey insists you treat your debt like a gazelle running away from a cheetah. That means run fast; duck and weave, do whatever you have to do to pay off debt and pay it off as soon as possible! There are also so many ways and methods out there that you can implement when it comes to tackling debt. Check my tutorial on how we paid off $6,000 in 6 months using the Snowball Method. There is another method called the Debt Avalanche that is similar to the Snowball Method but instead of paying your smallest debts first, you pay off the ones with the biggest interest.

How you choose to execute your debt payoff is up to you, but it is definitely going to require you getting a game plan in place. If you need a little extra guidance, I will give you some great steps to help you get started below.

As I said before, Tom and I opted to join Dave Ramsey’s Financial Peace University and are so excited to be in the final stages of our debt payoff with only $10,000 left to go before tackling our mortgage! I have created a playlist on my YouTube channel where you can easily follow along on this journey with us to learn exactly what we’re doing and can see just how quickly we can make this thing happen!

Save money

noBuilding up a good savings is absolutely crucial. Having an emergency fund set aside is huge as well as saving for major purchases in your life through methods like Sinking Funds. Let’s look at exactly why being sure to save money is an awesome thing:

  • Plan for retirement
  • Pay for major purchases
  • Having a financial safety net
  • Security
  • It collects interest
  • You can begin investing

So, it’s pretty obvious to see, building a savings is far more beneficial to you than having debt. See 12 ways how you can save $1,000 fast. But, I’m sure you already knew that. This is why, despite the amounts of debt you might have, so many people continue working and striving to save money. It’s something we all need and definitely want for the future.

Now, obviously, I don’t know your unique financial situation, but if you are really struggling to pay off debt, let’s talk about why you might do well to consider putting your savings on hold.

Stopping savings?

So here’s the big question everyone wants the answer to: “Should you save money or pay off debt?”

According to Dave Ramsey’s Baby Steps, the first thing you should do before you pay off debt is build a $1,000 emergency fund. Once you have a $1,000 emergency fund in place, you should begin putting all of your financial focus toward paying off debt.

See how you can get paid to have a savings account.

The benefits

The benefits of building a $1,000 savings and then putting all your money toward your debt has tons of benefits to it:

  • Pay off debt sooner
  • Pay less in interest
  • Start a bigger savings sooner
  • Have more financial freedom
  • Less calls from debt collectors
  • Get your life back

Seriously throwing your money at debt while putting your savings on the back burner can just help dig you out of this situation that much sooner! Then you’ll have even more money to put into your savings!

The debt payoff game plan

To get yourself started with paying off debt, I recommend these things in this order:

  • Check your budget. Do what you can to find or create that additional money that you are going to need to get started.
  • Consider a loan to help consolidate debt or lower your interest rate. This can be especially helpful if you have a lot of debt on a credit card with a high interest rate. Apply online with The Loan Exchange.
  • Save $1,000 Get your emergency fund in place so that you don’t have to stress about money troubles that might present themself. I recommend a high yield savings account so you have the potential to gain interest.
  • Tackle debt. I strongly recommend using The Debt Snowball that Tom and I have been using. It works and is a very simple method.

Keep going

No matter what, just keep going. It will be discouraging at times but do your best to always look on the bright side. I promise normal people pay off huge amounts of debt every day and you can be one of them. It might mean some serious adjusting and changes. It will take discipline and determination, but you can totally do this!

If you absolutely have to save

I get it, the idea of not saving can be really scary for people. So, what I say, is if you are absolutely too anxious about stopping your savings, then you should definitely look into opening a Savings Builder account with CIT Bank. For just $100 to open and $100 per mont, you can gain an interest of 2.45% with the Savings Builder account. Checkout the other perks.

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I always wondered if I should work to build a savings or try to get out of debt. This made so much sense!

About The Author


Renee is the blogger behind The Fun Sized Life. After downsizing with her family, she also took the time to get serious about he finances. Now she is sharing the wealth with all of her readers.


  1. Denise | 26th Feb 18

    This was one of the biggest discussion we had with my.husband when we first married and we opted to paying off debt mostly for the reasons you mentioned. even though having money in saving provide some peace of mind, debt interests are dream killers i tell you. thanks for sharing.

    • | 26th Feb 18

      They really are, Denise! Even more important is being able to have those kinds of discussions which is awesome!

  2. Elaina | 26th Feb 18

    I am currently working through paying down some major Student debt! It’s quite the burden and I want it paid off before I am 30! We have a lot to go, but we are working really hard at it!

    • | 26th Feb 18

      That is so great! It definitely takes dedication! You can do it!

  3. Johanne | 26th Feb 18

    I’ve tried paying off my debt (no interest) before saving, but it’s just such a big amount that is so demotivating! Now I’m kinda doing both, which is not ideal…until I figure out what to do! My boyfriend made me an excel and it has really helped me see how much money I can pay off and save per month.

    • | 26th Feb 18

      That’s awesome you were able to find a happy medium!

  4. Emily @ Pizza & Pull-Ups | 26th Feb 18

    Great info! I love getting good financial insight.

    • | 26th Feb 18

      Thanks so much, Emily.

  5. Lara | 26th Feb 18

    Thanks so much for sharing all of this info! My student loan debt is so overwhelming, but you’re right, it is only going to increase as time goes on! The cheetah reference is so true ha! So grateful for the tips!

    • | 26th Feb 18

      Paying off student loans was a great day! Good luck as you keep at it!

  6. Marc Schmidt | 26th Feb 18

    I actually got my credit card debt sorted out with the help of a debt consolidation company. I spent years feeling unsure of how to resolve it, but thankfully when I went for I picked the right company and got it fixed. Now I have a good balance between saving and paying bills off. It’s a great feeling to have that kind of balance in my life.

    • | 26th Feb 18

      That’s awesome!

  7. ShootingStarsMag | 26th Feb 18

    Thanks for sharing. I definitely want to build up my savings more before focusing on debt – which is just student loans right now. It’s good to know that’s the best way to go.


    • | 26th Feb 18

      Thats awesome that all you have it student loans!! Hooray!

  8. Justine @ Little Dove | 26th Feb 18

    It really can be so hard to decide between paying off debt and saving money, this is something that my husband and I discuss a lot. I think Dave Ramsey definitely has some great advice on the subject, my husband and I really enjoy listening to his radio show and we’ve both read his book.

  9. Katie H. | 26th Feb 18

    Great post! I know what it’s like to pay off a large amount of debt. My husband and I paid off $70,000 of student loan dept with high interest rates in 2 1/2 years after we were married. It took so much hard work and sacrifice, but I’ve never regretted it. We now are able to save so much because we were so used to living off so little. Life is so much easier when you are dept free!

    • | 27th Feb 18

      That is so awesome!!! I’m really hoping for similar results for our family as well!

  10. Melissa Javan | 27th Feb 18

    I’ve also saved a bit of money (mostly for rainy days) while I have debt. Then sometimes I use that savings to pay off smaller debt.

    • | 4th Mar 18

      It’s all about finding what works. Gotta love those rainy days!

  11. michaela | 27th Feb 18

    This post is so helpful! I really appreciate how much you break everything down and make it seem much more manageable. Thank you!

    • | 4th Mar 18

      Glad it was helpful!

  12. Bethany | 28th Feb 18

    Gosh such a good question! We kinda did a little of both at the same time honestly. But we really tried to do the snowball effect and paid off my student loans so we could be debt free before my first was born!

    • | 4th Mar 18

      That is so great! I’m glad you found something that worked for you!

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