What is the Better Option, Paying off Debt or Saving Money?

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We are usually stuck while deciding whether to pay off the debt or save money because both of these are equally important. It mainly depends on your financial condition and only you can find the answer for this according to your financial conditions.

You are not required to be overwhelmed while deciding what is a better option for you, a good plan can help you to reach a decision. Here, we will guide you toward finding your answer to paying off debt or saving money.

How to Decide?

There are different kinds of debts like student loans, credit cards, home loans, car loans, etc. Whether you have to pay off debt or save money depends on your financial status. What seems to be a smarter way is to pay off your debts before saving money but maybe your financial conditions can allow you to do both at the same time. Many situations demand savings before paying off debt. It all depends on your

Whatever is your case, a well-planned strategy is required to tackle the situation. A good strategy will help you to make a smarter decision about your debts and savings.


Which situation allows you to pay off debts before saving?

If you have enough emergency funds which include 3-6 months of expenses amount or even if you have some amount that you can use during any emergency, you must focus on paying the debt. When you have some amount already in savings, you can easily focus on aggressively paying your debts.

Once your debts are paid fully, you can shift back your focus on savings like you use to do before.  If this is your scenario, you must pay off your debts first.

Which situation allows you to save before paying off debt?

In case you have a good source to pay off your debt but you don’t have an emergency fund, the smart option is to keep aside some amount first as savings for an emergency. Life is full of surprises, you never know what is going to happen next moment. If you have some amount fixed as your emergency fund, you will not end up taking more debt for tackling the sudden situation.


If this scenario suits you, you must first save some amount for emergency and then pay off your debt with a free mind.

Create a budget

Now that you know what is a better option for you according to your financial scenario, you must create a budget to fulfill your approach.

If you are paying off your debt and have some money kept aside, you are already on a right track. To make this approach even more successful, you need a well-planned budget.


A good budget will help you to track your money flow. If you are paying off your debt, your focus should be more on aggressively paying off the debt rather than spending money here and there. Try to cut down your expenses as much as you can to make the debt-paying procedure fast.

Paying off your high-interest credit card debt first is more sensible than saving the money in a low-interest bank. For example, if you are getting 1% interest from your saving account and paying 10% on your debt. You are losing your money. It’s better to pay your debt with the money of your saving account and then start your saving in a high-interest paying bank.


You must keep these things in mind while deciding about your savings and debt paying. You can also try investing along with debt paying but all this purely depends on your budget and financial stability. You can find ways to increase your payment so that you can manage both together.


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