Should I Save While Paying Off Debt? 🤔

Saving Gives You Options

The only thing inevitable about your debt payoff journey is an unexpected change. Let me say that again: an unexpected change will 100% happen. Imagine you have $10k in debt and you face the following 2 scenarios:

Scenario 1:

You’re putting $500 towards debt a month for a year  = $6000 in debt left at the end of the year

Suddenly, your car breaks down. It costs you $2k to fix and you need it to drive to work. Your savings balance is nearly $0, so what are your options? You don’t really have any besides taking out more debt

Scenario 2:

You’re putting $300 a month towards debt and $200 into savings for a year = $6400 in debt and $2400 in savings at the end of the year

Your car breaks down and it costs $2k to fix, but now you have options! You’re able to cover the cost with your savings and still have some left over to treat yourself.

Play to Your Emotions

You may be asking yourself - in the first scenario, I end up with less debt than in the second, so why would I choose #2? The biggest difference is the way you feel in both cases.

Scenario 1 is associated with words like: setback, obstacle, stuck, failure

Scenario 2 is associated with words like: security, safety, options, having

It’s easy to feel like you’re not making progress if you face a blocker or rebound, as opposed to making smaller strides on a less volatile journey. We can savings the journey smoother.

How Much Should I Save?

It’s hard to know what’s the right balance, and it all depends on how much you’ve saved already and your total debt burden. We believe in savings layering, where you start by building enough to cover an emergency expense, then graduate to a full emergency fund, and then savings for aspirational purchases.

Here’s a good rule of thumb below. One exception: if you have $0 in savings, start suuuuper small (like $15/week) and build your way up so you don’t get overwhelmed.

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