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Pay Off Debt or Build Up Savings?

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Ready to finally fix your finances, but simply not sure where to start? Is it more important to pay off debt first, or build up your savings? Here's how to know exactly what steps to take (and in what order) to get--and keep--your finances on track!


Figuring out this financial freedom stuff can be a little confusing sometimes! Save first or pay down debt? If we save first, aren’t we just accumulating more debt? But if we focus on paying down debt, then how do we even begin to save money? Ack!

Anyone going through the process of trying to gain more stable financial footing eventually finds themselves feeling stuck in a catch 22. If you feel like you’re running in circles trying to figure out how to do what and when, you’re definitely not alone!


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I know I’ve definitely struggled finding these answers. It seems logical to pay off debt as fast as possible. After all, debt usually includes interest and interest is time-sensitive. The longer it takes to pay off debt, the more interest we end up shelling out for. Yikes!

On the other hand, if there’s an emergency while paying off debt, then we’re really in trouble, right? Basically, an emergency will swiftly undo any progress we’re making as we pay off debt. Suddenly, with one swipe of the credit card, one car repair, one plumbing emergency, or one vet bill, we’re right back in debt again.

It’s enough to make your head spin.

Paying Off Debt vs Building Up Savings

Where to Start…

First off, I should start by saying that I don’t consider myself to be some sort of financial guru or expert. In fact, when I started this blog, I was pretty much a disaster with money. My husband and I were fighting about money all the time, and I had no idea how to get a handle on literally anything. I wasn’t making good choices, and although he had always been pretty good with money, I was taking him down with me.

After a few life changes (which you can read about here), my husband and I started to figure out ways we could successfully tackle our debt, make better money choices, and start building up our savings. We looked to experts who could help us on our journey. We started to live more simply and embrace a less-is-more-mentality. We also started to eat at home more often, and we cut back on shopping for toys, books, clothing and “stuff.”

One of the biggest helpers along the way was our participation in Dave Ramsey’s Financial Peace University. It helped us identify some roadblocks we were running into and figure out how to even start to tackle our debt and make headway financially. In Dave Ramsey’s course, his first recommendation for getting out of debt is to stop following the advice of broke people. Again, we have to look at the successful debt slayers and figure out what they can show us.

That’s why I also recommend Slaying the Debt Dragon (love that title!) written by my friend Cherie Lowe. In her book, she outlines how she successfully paid off $127,000 in debt. (Wow.) Cherie offers several tips for those of us who are getting started paying off our debt and facing these questions.

Financial Stability

First, Start an Emergency Fund

Both Cherie Lowe and Dave Ramsey recommend starting an emergency fund. This is Dave’s Step One in his Total Money Makeover Baby Steps. Cherie swears by it as well.

The thought behind an emergency fund is this: When life’s unexpected emergencies come along (and they will come along), an emergency fund of $1,000-$2,000 will help you address the emergency without going further into debt.

Time and time again, savings bloggers and financial experts have reiterated the importance of an emergency fund. It can seem a bit scary, of course. Coming up with $1,000 seems nearly impossible when you’re broke. In fact, you might be thinking, “I could sooner fly to the moon than produce $1,000 today.”

However, there are ways you can easily start an emergency fund today. You don’t have to do it all at once. Break it down into smaller parts. $1,000 is less than $20/week (it’s $19.23 to be exact).

Think of the ways you can possibly come up with $20 extra per week. Could you skip a trip to the coffee shop? Forgo a magazine in the checkout line? Pack a lunch instead of buying something? Just by performing these small actions, you can sock away $20 per week. In a year’s time, you’ll have $1,000 put away.

Now, if going without an emergency fund for a whole year seems a bit scary, there are other ways you can build up your emergency fund right now. You can sell something (or a few somethings) you have on hand. You can cut back on your bills, utilities, and eating out. Or, you can pick up an extra job or do some work from home. There are many surprisingly simple ways you can build your emergency fund quickly.

Financial planning company brightpeak offers a free eBook with tips to help you boost your emergency fund. The sooner you build up your fund, the sooner you’ll feel safer and more at peace if you’re facing any emergency.

Smart Money Tips

Then, Start Paying Off Debt

Once you’ve determined you want to start working toward slaying your debt and tackling savings, the first thing you need to do is to examine your budget. This means gathering together all of your bills and looking at what you owe—the good, the bad, and yes, even the super ugly.

If you’re new to budgeting and aren’t sure how to get started, check out our budgeting 101 archives for tons of tips and our free budget planning worksheet. These resources will get you set up to start making real headway on your debt and figuring out where you can save a little and how to get control of your finances.

Once you’ve gathered your bills and assessed your budget and amounts, it’s time to make yourself a promise. This was one of the biggest challenges for me, and I know it’s hard. Promise yourself you will stop taking on more debt.

If you really want to get things paid off, you have to stop taking on more debt. Having an emergency fund in place will help give you the confidence and safety net if something comes up unexpectedly. But to really make progress and headway on getting your finances under control, you have to stop taking on more. Then, you’ll be ready to pay it down and slay it!

Once you’ve figured out your budget and you’re ready to start crushing your debt, you’re probably wondering how to begin. Again, I have to recommend a Dave Ramsey method: the “Debt Snowball.” (Sounds kind of fun, right?)

With the Debt Snowball, you gather all of your debts together and start to pay off the smallest debt first. Other advisers recommend looking at interest rates and other factors first, but the Debt Snowball method is one of the most satisfying and gives you almost instant gratification.

When looking at your budget, figure out how much extra you can put toward paying down your debt, while still making all of your other minimum payments. If you’ve just worked on your emergency fund, chances are you’ve gained a few tips you can now apply to earning extra to pay off debt.

For some, it might be really challenging, so maybe you can only afford $10 extra toward paying things down. That’s fine! Any progress is still progress. Don’t get discouraged. Just do what you can (and continue to look at areas of your budget you can shave down to boost your snowball).

Each month, as you pay that little extra toward your debt, you’ll see real measurable progress! It’s exciting to see it go down—and so freeing! Once your smallest debt is paid off, take everything you were paying toward that debt and roll it over toward tackling the next smallest item on your list. Keep going and use your momentum to propel you forward!

Working on your Financial Stability

When to Boost Savings

If you’ve managed to slay all your debt (with the exception of your mortgage), then you’ll want to start building up your savings. It can take quite a while for most of us to get to this step, because the reality is, so many of us are living with the burden of debt.

Coming out from under the weight of debt is a tough battle, but once you’ve waged war, you’ll feel such confidence and reassurance in your abilities that you’ll want to keep going. It can be a challenge not to backslide, and of course, there are always unexpected things that can happen like a job loss, injury, or major emergency—all of which can derail some of your progress.

When you’re out of debt, you’ll want to start building up enough savings so that NO disaster out there will derail your progress. This means saving up 3-6 months’ worth living expenses. Think of how much peace it brings to know you could survive a 6-month crisis without losing your home or sending your family into a debt spiral. That is true financial peace.

If the idea of becoming debt free and creating ample savings seems like an impossible dream, don’t give up! Take small steps to move toward your goals and you’ll reach your destination before you know it. It’s all about progress and moving forward, even when things seem hard or scary. Take small steps to keep you moving on your way.

We can all benefit from feeling at peace from our financial worries. Even if we’ve made mistakes, we can forgive ourselves and start to work toward our goals. Try not to beat yourself up about the past. Instead, move forward with a plan and know you can start saving and tackle your debt today!

Ready to finally fix your finances, but simply not sure where to start? Is it more important to pay off debt first, or build up your savings? Here's how to know exactly what steps to take (and in what order) to get--and keep--your finances on track!


  1. February 13 at 12:42PM

    Ruth, Thanks for the great post. Dave Ramsey is the best. I think it would be great if his no debt philosophy was taught in a high school math class. It would really help kids get started on the right foot and allow them to avoid so much stress.

    • Ruth Soukup
      February 15 at 07:17AM

      I agree, we need to teach our kids early about staying out of debt and how to make wise financial decisions. 🙂

      • Julia Pearl
        November 2 at 02:21PM

        They actually do in some schools. I heard him say something like 30k schools? I could be totally off about the amount but there is a high school program. I just wish there was a class all together that taught “how to adult” like doing taxes, ect.

  2. February 14 at 09:07AM

    Ruth – question about your post. We live in an area where rent is by far higher than what a mortgage would be, even without 20% down. With four kids, student loans and a commitment to homeschool, it feels like we will never be able to afford a home, but if we bought, it would help free up money to pay off debt. Do you think there’s every an exception to this? Thanks!

    • Ruth Soukup
      February 15 at 07:15AM

      There is always an exception. You have to figure out what will work best for you and your family. 🙂

  3. February 15 at 05:14PM

    Great advice! We struggled with this question for years before we realized that we HAD to make some changes to get out of debt permanently! Debt was keeping us from living fully! And I don’t just mean enjoying life, I mean we had to put dreams, calling, even our family on hold because of debt’s grasp. I don’t usually drop links, but this just seemed too timely. Just the struggle I was remembering today. (

  4. Grace
    February 17 at 05:39PM

    I have the first step down, we finally have $1,000 in savings and are trying to do the snow ball but my question is this, our CC have a really high rate so even on the smallest putting any extra that we can (literally sometimes $10-20) the interest eats it up and it seems like a no ending situation, what else can we do?? I work full time and my husband has 2 jobs already, please help! Thank you!!

    • Anonymous
      February 20 at 08:30PM

      Balance transfer to cards with 0% apr

  5. Melissa
    February 17 at 08:03PM

    One of my problems is I am disabled and you cannot have too much money in the bank,and I work part time,but barely make hands meet. I also got in over my head in credit card debt for the fourth time. What do you suggest for this delmeia?

    • Rhodesia
      February 18 at 05:58AM

      My prayers are with you for wisdom & order in your life.
      I have worked with people who live on very little (SSI – less than $750)a month & they have been able to save & meet their basic needs monthly. Starting with the basics are key. Don’t give up. You’ll get there. Build your confidence in you are enough & your are worthy to be debt free.
      My pastor always says as a church “we ain’t going to worry about money” & I have applied that to my personal life & am seeing a shift in financial situation for the better.

  6. February 19 at 12:37PM

    Great post! The idea of an emergency fund was so foreign to me when we were totally broke-not only because I couldn’t imagine ever having enough money to fund one, but also because it seemed so strange to be worried about creating an emergency fund when you’re already living paycheck to paycheck but it really does make more sense in the long run! It’s just a difficult concept to wrap your mind around.

  7. Cindy
    February 19 at 04:46PM

    This makes so much more sense than just starting out with no plan. I’ve tried so many times without a plan to only become so overwhelmed I just say forget it and end up further in debt & still no savings. I am so excited that I’m going to implement this immediately!

  8. February 21 at 09:48PM

    We’re in the process of working on our savings. It’s not easy but it will be worth it down the road.

  9. February 22 at 11:13AM

    I love this thank you! My husband and I have been working hard toward our goals in this area and these are great tips and reminders!

  10. March 1 at 11:21PM

    Thanks for sharing this content. I have recently lost my six figure job and started a blog. I am also in the process of attending The Elite Blog Academy. It was a big investment since my income will only be my severance package and my side hustles! 🙂

    I am looking for ways to quickly pay off debt and stretch my severance out. This was a great post.

  11. March 22 at 09:50PM

    A lot of people struggle with what to do first, pay off debt or save. I like the idea of getting out of debt first then begin saving. It’s easier and more interesting to save money when you don’t have any debts to consider first.

  12. March 24 at 02:29AM

    Paying off your debt and creating an emergency fund (and beyond) all starts with your mind set and a commitment to your goal.

    At every turn, at every intersection where there is an opportunity for spending, you may need to keep repeating to yourself “”I want to be free of debt”” and make a choice. This can be as simple as substituting a lower-cost item for what’s in your hand.

    Although aiming high is a good thing, you don’t need to set goals too lofty to feel good about progress. For example, start with trying to save $100; if you’ve never done it before, you’ll be amazed how good hitting this goal makes you feel.

    You don’t need to deny yourself everything, either. Set up a reward system for yourself: For example, “”Once I hit $100, I’ll treat myself to a $10 lunch; once I hit $200, I’ll take my spouse out to lunch.”” Little items such as these can help provide satisfaction that your work.

    Eliminating debt is much the same. The snowball method works great, but requires the same commitment as does meeting your savings goal. When you have many obligations against your finances, all that “”noise”” can be overwhelming, and that can lead you to want to give up the fight. Don’t. Pick one battle — one credit account — and attack it as quickly as you can. Every extra dollar you can commit means this one debt is going to be gone forever. Once it is paid off, you have more financial power to attack the next debt in line, and free up money to pump into your savings at a faster rate.

    It can feel at times like shoveling a mountain of sand with a teaspoon, but stay at it. Progress to hit your goals is just a spoonful away!

  13. June 9 at 09:25PM

    This post is so so wise. My husband and I just finished our emergency fund, and in the process opened up 5 other small savings accounts (for health, gifts, car/home maintenance, and taxes). Starting with savings was literally the best thing we ever did. I feel totally secure attacking our debt now that we have some extra cushion in the bank.

  14. August 11 at 02:55PM

    This is great, practical advice! Thanks so much for making something potentially overwhelming feel very simple and doable!

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