- February
Posted By : Teri
Should you save money while paying off debt?


America Saves Week is coming February 24th - March 1st!  If you don't have any savings, you are not alone.  Millions of other Americans who also don't.  See why this is problematic:

What if you have an emergency?

Many people have no emergency savings, therefore end up using credit cards to cover emergencies.  A true emergency will be different for each of us, but for me, it was covering a recent life-saving surgery for my dog.  It's also been used for a transmission that failed.  It's also been used for new brakes.  I've had to stop my debt snowball many times to replenish the emergency savings - but it was there so that I didn't have to go into debt to cover my emergency.

Do you live paycheck to paycheck?

Not having any money in savings means that many turn to payday loans in order to pay their bills.  Rare are the folks that take out just one payday loan.  It begins a vicious cycle of borrowing from Peter to pay Paul.  Start small - set an amount in your budget that you can set aside in a rainy day fund, and you'll eventually build that up.   Not to mention that if you are not saving now - how will you ever plan to retire?

What would happen if you became disabled or lost your job?

Do you know how you would pay your rent or mortgage if you lost your job or became unable to work due to an accident or disability?  What about paying for your lights and water?  What about buying groceries?  Most people don't think job loss or disability is going to happen to them.  It happens.  If it happens to you, be prepared.

How much should I be saving?

If you are a little on the geeky side as I am, I love a good Excel spreadsheet.  The fine folks at Vertex42 have made every kind of spreadsheet you can imagine, and I often use their spreadsheets for my planning.  They have tools to help you keep track of your budget, and tools to help you determine how much to save.

If you have no savings as of today - start with an emergency fund.  $500 - $1000 is best.  If you find the thought of savings a very unrealistic task, start with $500.

How do I get started?

First things first - you must spend less than you earn, period. If you are spending more than you earn (borrowing from others or using credit cards), you must fix that problem before you can begin to save.  Does it mean taking on a part-time job?  Looking for a higher paying job?  Cutting out expenses?  You can only impact your budget in two ways: Earn more or Spend less.  Bonus: Are you getting a tax refund?  If yes - save some!

  1. Identify how much money you have leftover in your budget each month.  Commit to saving some.  I'm a fan of only saving $1000 and putting the rest towards your debts if you have any.
  2. Make the transaction automatic.  The best way to save without thinking about it is to have your payroll department split your direct deposit.  If you put 100% of your check into your checking account, try putting a specified amount into savings, and the rest into checking.
  3. Like cash?  That change jar can add up to big bucks fast!  Make it a point to put loose change in a designated spot and deposit that money into savings every couple of months or so.

I welcome your comments!  Are you meeting your savings goals or are you at a loss for how to find the money to put away?




  • I agree with saving up an emergency fund first. It does not have to be huge, about $1,000 sounds like a reasonable amount. After that, stop saving until your debts are paid off (except maybe mortgage). I really like your idea of splitting a direct deposit for those who work for companies. It’s tougher for self-employed, but doable.

    Thanks for a great reminder about saving.

  • As for us we do not have any savings and yes, in the past my husband did lose his job. Plus he has been cut back to part times since Dec. we just count the days till he goes back full time. So right now we are living pay check to pay check and I have no clue how much we should try and save.

  • It is difficult to save money, but doable when both husband and wife are working together towards that goal. It takes creativity to enjoy the weekends cheaply. Good Luck, you’re on the right track.

  • Hi Teri – Just wanted to stop by and thank you for leaving a comment on my new blog. You were the first, LOL! You’ll always have a special place in my heart <3. I see you're doing the Comment-a-thon, too. Have fun!

  • I agree that you need an emergency account while paying off debt, otherwise you can easily find yourself back in debt. I also love a good excel spreadsheet!

  • Its amazing thta when your younger you don’t even think about savings. I want this, I want that. I can attest that it will catch up with you eventually when you live like that. I am following your savings plan already, paying off the credit cards that I have and working to have at least three months of money in there to survive if something should go wrong.

  • Ah, a topic very dear to my heart.

    Currently we have one month’s expenses as our emergency fund. We are also paying into an employer matched retirement fund. We just finished paying off all debt, but the mortgage, and during that time we struggled to keep much in the emergency fund.

    A tip I would add is that any extra or surprise cash definitely should be added to savings. My husband gets paid weekly, but we only budget on four weeks worth. That way when the occasional five week month happens we use the extra paycheck to refund savings and to go towards big projects and purchases.

  • This is a great perspective! We finally just paid off our debt a little while ago and when my husband gets a job when he is done with the police academy, we plan to rent a smaller place so we can save money! I am so looking forward to finally doing that!

  • The most freeing thing we have ever done!!! Having a savings and getting out of debt except for our mortgage. Simply if we want it and don’t have the money for it, put aside a little more.

  • Great post! Having a Savings is HUGE. If you are paying off your debt and opps….the furnace goes. Use your savings and not you credit cards. That is HOW you get out of debt. You become less reliable on the plastic and financial freedom occurs.

  • My husband and I are trying to pay off our debt as much as possible this year. We are “saving” $200 a week to put towards it. It has been tough, but I think we are getting the hang of it. We do have an emergency savings of $1000. After we get everything except our mortgage paid off we will be working on saving as much as possible for a car.

  • This was an awesome post. We are currently debt-free (hooray) and trying to SAVE as much as possible. We are in a time of our lives where we can do this, but it also means learning a lot about what we can and can not live without. I’ve become meticulous with our spreadsheet, but I’m excited to look into Vertex and reading more on your thoughts. It is always good to have cheerleaders for budget and savvy money saving out there! Thank you!

  • We work so hard we dont often have time to spend money apart from on essentials/bills etc! We put all our loose change into a box – last time we counted we had £300 despite it being in small change – still counts!

  • We don’t really have savings set aside, but if we do have enough extra in the bank that we could get by for about a month if we lost our income. I’d like to stretch that to 2-3 months just in case dh were to take a turn for the worse, but we’re working on it. I’d like to get our trailer paid down so that is one less bill we would have to worry about. We’re working on that too.

  • My husband and I have recently come to the conclusion that we could possibly live on less than what we are bringing in now and we need to start saving. Thank you for these tips. I can’t wait to get started!

  • Teri,

    Thank you so much for linking-up last week at Beauty Observed! I was really happy to see yo there 🙂

    I love having that little tiny savings account. This week, our dryer broke again and couldn’t be repaired. I was able to buy one with cash because we had the money in the savings account. My husband is working overtime this weekend and we will be able to replace our emergency fund.

  • I enjoyed this post. My husband and I have been on the Dave Ramsey plan for a couple years now and it has worked miracles. Thanks for the additional great tips on saving even while paying off debt!!

  • ~~~~~~GREAT POST! You offered some great advise. You are so right that so many people are just now to start thinking about savings and emergency funds, and may do not know where to start. For many others, finances are so tight that saving anything is very, very difficult. That’s why I especially love the suggestion to automatically deduct a portion for savings! Keep up the awesome work, and I will share your blog far and wide. ~~~~ Thank you for your hard work.

  • I wanted to save and payoff all debt, so I got a job even though I wanted to be home, so I could pay off all credit cards and now I have started a savings account. I want to quit but like having the savings so that is my goal right now.

  • I guess we can be grouped in with the rest of america, a huge need to readjust finances. We have a goal of paying off all credit cards by September and starting a savings account also. For us if anything were to happen, I like the idea of debt not hanging over our heads.

  • It can be incredibly hard to save money while you are getting out of debt or living on a tight budget, but once we started an automatic deposit into savings every pay (into an account separate from everything else) it got easier to save. And that little savings has come in handy a few times with unexpected doctor bills… You made great points!

  • I learned through Financial Peace University to get an emergency fund first, then pay debt. This way, when something bad happens, you can pay for it while not getting further into debt. Now we are using the debt snowball and paying things off!

  • Great advice, Teri! My husband and I adopted this philosophy a few years ago, and I am proud to say that we are nearly debt free and have a sizeable emergency fund savings. Looking forward to learning more from you! ~Arianne

  • Very sound advice! I’ve found that cutting out small things ($5 here and there) really helps and adds up a lot more than one would think!

  • Everyone has their own unique situation when it comes to their finances, but it is always a good idea to save something, even when you are paying off your debts because life is so unpredictable. Good post.

  • IMO, there is only one answer here. Yes, you should always save money. Hubby and I were just talking about how our IRA would look if we had just started putting in small amounts of money every month waaaaaaaaaaaayyyyyyyyyyyyyyyyy back then. I started when I was 40 and wish I could’ve 20 years ago. But, we just recently paid off all debt after 5 years, we were in real estate when it crashed and had a huge debt from that. What a true blessing that was to be able to say we did it and still was able to put money in our Roth every month.

    • Good for you Tammy! Don’t you wish we all had a magic power to write a letter to our 20 or even 30 year old self? We never know these things until we get old enough to have perspective.

  • I follow Dave Ramsey’s principles about saving which seem about the same as you’ve outlined here today. It’s worked for me and having that $1000 emergency fund stopped me from adding more debt when I needed the cash.

  • Great advice! My family and I are working towards becoming debt free!

  • I am always a fan of having a savings while paying of debt, as well as having the savings be automatic. Its easy to delay putting money into savings and procrastinate until you end up spending it.

  • I agree with having an emergency fund just in case. We had to use our when our furnace went out not too long ago and I’m so glad it was there so we didn’t have to put that on a credit card.

    • Good for you Holly! We didn’t have enough in the emergency fund for the furnace we needed. We had to push pause on the debt snowball to cash flow ours. Again, good to not go into debt for it, though! Lucky for us, ours went out at the end of spring, so we had several months to save for it.

  • Great tips during America Saves Week. This article and reminder came at a great time as my daughter is celebrating her first job. We are going to go over the basics and make sure she starts out on the right foot of saving, investing and donating to charity.

  • I just downloaded some of the forms from Vertex42 that you gave, to make sure that I am on the right track.,. Thanks for the info… Love it

  • Teri – This is a great post – I hope people take it to heart and get their finances in order – it’s a hard pill to swallow but needs to be discussed. We are facilitating a Dave Ramsey FPU Course at our church and it’s help tremendously. It’s worth every penny. Thanks for sharing. Blessings, Tina

    • Awesome! Good for you for facilitating! It is a great class. I was a financial counselor for years before I took my husband to FPU. I wanted him to hear it from someone other than me 🙂

  • An emergency fund is important. I do save my spare change in a can and have a savings account that I try to contribute to a couple of times a month. However, I do agree with some of the other commentator, that saving can be difficult. I have set my financial goals for this year to pay off any remaining debts and work on saving more, so I can say that I’m on my way. I have paid off a credit card that’s been around for years. I was SO excited to have it out of my life and cleared from my credit report in January 🙂 I would recommend that people check their credit reports for FREE every year or throughout the year with the various agencies because it’s good to know what’s on them. It’s definitely good to know who you owe so it doesn’t interfere with your saving. Thanks for sharing the link in your post, I just looked over their forms.

  • We always save our change for a whole year, then cash it in and use it for spending money on vacation. We have been trying to use as much extra money to pay down debts.

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