Skip to content

Why You Shouldn’t Neglect Your Savings While Paying Off Debt

Paying Off DebtI was recently doing my usual daily perusing of Facebook when I saw a bunch of hometown friends sharing a financial article that argued people should pay off all their debts before saving for emergencies.

At first, I was totally shocked. As a finance expert, I get that paying off debt is important, but it shouldn’t be at the cost of your own financial detriment. Keeping an open mind, I clicked on the article and read it anyway.

It basically stated the following: If you have high interest debt, focus on paying it off as quickly as possible. That may mean neglecting your savings for a bit, but at least you get rid of high-cost debt.

This post has been written by the ever-talented, Amanda Abella. Enjoy!

Why Neglecting Your Savings In The Name of Paying Off Debt Is a Problem

While I get the argument that paying off debt should be a top priority, there’s just one massive problem with this logic.

If you neglect your emergency savings (of which Americans don’t have much of to begin with) in an effort to get rid of your debt, and you find yourself having an emergency during this time, you won’t have the liquid cash to cover it and will slap the expense on credit. This only further perpetuates the vicious cycle you’re trying to get out of.

Besides, there are multiple ways that you can save and pay off your debt at the same time. Here are just a few of them.

Start with $1,000 In Savings

While most experts agree that you need at least six months worth of living expenses in case of an emergency, the reality is this can seem like an audacious task where you’re ready to quit before you even start.

That’s why financial experts like Dave Ramsey suggest starting off with just getting that first $1,000. Once you’ve got that, you’re covered in the case of a car repair or emergency room co-payment.

From there, you can ease off the gas pedal on the emergency savings (though don’t neglect it entirely) and put the focus back on paying off debt.

Find ways to lower the interest on your credit card.

When it comes to paying off debt, particularly high-interest consumer debt, most people don’t realize that their interest rates aren’t set in stone. In fact, there are multiple things you can do to lower interest rates.

  • Negotiate a better APR. If you have a good history with your credit card company, you may be able to negotiate a lower APR on your credit card bill. Ramit Sethi of “I Will Teach You To Be Rich”
  • Balance transfer to a 0% interest rate credit card. There are several balance transfer credit card promotions out there that can help you lower your interest payments on your debts. Just make sure to crunch the numbers so you’ll know whether or not you can pay off your debt during the promotional period. And keep an eye out for transaction fees as well.

These two tips alone can save you an exorbitant amount of money on interest fees.

Find Ways of Making More Money

The last step is to find ways of earning more money. Side hustles can come in handy when you’re trying to pay off your debt while still saving money. In fact, side hustling is how many people have been able to climb out of their mammoth debt hole.

Want to start your website? It’s easy with this step-by-step tutorial! Still need help? Send me an email at derek (at) lifeandmyfinances [dot] com.


Final Thoughts

You do not have to neglect your savings when paying off debt. By following these tips you can manage to save and pay off your debt at the same time without feeling like it’s an impossible feat.



My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. Awesome article, Derek. For the first few years of our debt payoff journey, we followed the “no savings” rule and it created more and more chaos, especially since we started out with a REALLY high DTI (65%). Once we switched gears and started putting money in savings every month (we started with 1-2% of our net income and vowed not to touch it unless absolutely necessary) things got SO much easier. No more needing to keep that credit card “just in case” of an emergency. AND, we got into the habit of saving – and leaving it there. I strongly advocate saving while you pay off debt, even if it’s just a bit at a time.

  2. You’re absolutely right. The one thing I can never, and I mean NEVER, understand is why so many people (including personal finance bloggers) think that it has to be exclusively one or the other. You can save $1,000 and then shift entirely to paying off debt…or you can split between savings and debt…or whatever works for you. I think every situation is different depending on the person and their circumstances, but rarely does the ‘all or nothing’ approach make absolute sense, yet that seems to be the only options that are often considered.

    • Yup, if you think your quick emergency fund should be $2,000 then sure, save that! What DOESN’T work though is when people try to save $20,000 before they pay down their debts. That would just take FOREVER and they’d NEVER get to their debts!!

  3. Totally agree, Derek. Why not do both. While I am generally a fan of Dave Ramsey’s method of debt repayment, I disagree with him when he stops the saving at $1000 and doesn’t start the retirement step until later. If you put off saving for retirement (or saving in general) you seriously lose out on years of growth and compounding. That’s losing free money…..well, until you get taxed on it that is. But splitting the amount you have available among debt payoff, retirement and general savings allows you to have accomplishments in all three areas.

    • I don’t mind stopping at $1,000, but you’d better be gazelle intense to get rid of your debts! If you foresee a larger expense on the horizon, then by all means save up some more money! There’s no method that works 100% for everyone. Tweak it to make it work for you, but always have debt freedom as your #1 goal. Don’t tell Dave, but I never stopped my retirement contribution while I was paying off debt (shhhhh!!), but it still worked out pretty good for me! 🙂

  4. Yea! Great information! The hubs and I made paying off our debt a resolution (again) this year. So far it’s going better then previous years. We are working on our emergency fund before contributing big chunks of money to our debt. And it was the best feeling when we had to repair something on our furnace and my van and we were able to pay cash! Slowly but surely we are getting there! Thanks Derek!

    • Saweeet! That IS an awesome feeling. Great job Kelli!

  5. You make a great argument! I definitely agree with you that if you do have an emergency and don’t have any money saved up you are going to have to pay off that debt on top of the other debt you also have to pay off! Side hustles are a great way to help with the debt payoff process or help put some extra money in your savings account! There are so many options when it comes to side hustles, the list is endless!

    • Heck yeah Centsai! I’m a huge fan of side hustles! What’s your favorite?

  6. There are a lot of different ways that you can pay down debt and save money. Getting a second job, minimizing spending, selling items that you no longer use, utilizing a balance transfer, etc. It is important to have some savings or you will end up just staying in your cycle of debt. Thanks for sharing!

    • You got it! So many different things you can do!

Comments are closed for this article!

Related posts