Deciding to Save or Pay Off Debt

To Save or To Pay Off Debt

How to decide to pay off debt or to save?  Here is the thing, if you don’t save and focus all money on paying off debt, there is potential of creating more debt.  Things always come up, either with your car, some household related item, and let’s not forget about birthdays and holidays.  Life always provides us with the unexpected.  When planning a budget, even though the cost may be unknown, we can still plan.  For instance, birthdays and Holidays come every year.  One thing my wife and I do, we have a separate savings account solely dedicated to Gifts.  Every check money is put aside into the account.  That way every Birthday or Holiday that comes around, money is available for that purchase.  We also have an account for car maintenance.  This account covers oil changes and any car maintenance issues that may come up.  Money is available when needed, that way we don’t risk the need for a credit card purchase, which will then increase our debt.

Here is the thing, this does not mean we need to dedicate to savings before paying off debt.  Doing this will cause stagnation with your money.  Yeah, savings may be building up, but your debt is not moving anywhere.  Also consider the interest that is building on that debt, which is actually adding to your debt.  Balance is key.  Finding that sweet spot between savings and paying off debt is key.

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