Save or Pay off Debt

When you find yourself sinking into a debt hole, you are faced with a dreaded dilemma, should you save your money, or should you focus on paying off your debt. Saving money is a good idea, as you can create an emergency fund and save money for the future for things like a higher education or a married life.

However, there is no doubt that paying your debt is also a pressing issue since, the longer you take to pay the debt, the bigger it will become, courtesy of interest rates.

So, what do you do? Save or pay off debt? Pay off debt or save?

Know your Financial Standing

The first thing to do is to know what your financial standing is. This includes three basic things, income, expenses and debt amount. Furthermore, thoroughly evaluate your income and expenses. How can you improve your income? An overdue promotion or salary hike? How can you decrease your spending? Reduce the number of restaurant, club and pub outings?

For debt, it is an excellent idea to take a look at your credit report.

Run the Debt Numbers

Run the debt numbers on two scenarios; if you saved and if you didn’t. What is the debt situation in those two scenarios? If you didn’t save, how much did the debt grow and will you be able to manage that amount.


Ultimately, your answer will depend on the priorities. What do you want to get first?

– If education is a priority and you don’t want to incur more debt, then yes, save.

– If setting down with a partner is priority and you need the money do so, then save. However, take the whole picture into consideration, you might take a home loan to buy a house; to get the best deal, you need a good credit score which is not possible if you side-line your debt.

– If you are saving up to buy yourself something expensive and you want don’t want to wait longer than you have to, then ignore your debt.

How important is saving? It all depends on your reason. Here are two things to think when you prioritize.

– It is vital that you have an emergency fund in case you are inflicted with health issues, family trouble or unemployment. This is a big priority.

– The larger your debt and interest rate, the quicker the debt amount will grow and drag you into a sink hole.

If you think saving is worth the cost and increase in the debt amount, then yes, save.


Prioritizing over debt, or over saving, is not your best solution. Finding balance is, and for that you need to be the best financial manager you can be.

– Find a way to minimize your expenses to the minimum, wherein your get rid of luxurious expenses that you don’t require. Budgeting is a great way to do this.

– Divide the income that is not spent to both saving and debt.

– Find other ways to reduce the debt, like get a lower interest rate, stop using credit cards and consolidate your debt, to name a few.

Every person’s situation is different. If you have a lot of debt and have defaulted several times, it is best to focus on paying it off as your lenders will start taking action against you. However, if you don’t have a pressing debt, focusing on saving may be a good idea.

It’s best to consult with a professional to know what decision is right for you. At 4 Pillars, we offer the best debt consultant for you.


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