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Week 5: Should I focus on paying off debt or saving money?

These are commonly conflicting goal for all individuals. I’ll share some principals to guide your own decision making but also a free tool you can use to take action today!

I. Strategy: See below for generally accepted debt payoff and savings principals.

• Focus on Paying Off Debt When:

  • You have high-interest debt (credit cards).

  • It’s financing depreciating assets (cars).

  • You have no penalties for early repayment.

  • Your debt feels overwhelming or is negatively impacting your mental health.

• Focus on Saving When:

  • You have little to no emergency fund.

  • Your debt has low interest rates and finances an appreciating asset (a 3% mortgage in 2020)

  • You want to take advantage of time-sensitive savings opportunities, like employer retirement matches.

II. Tactics: See below how to choose and begin progress on both.

Assess Your Emergency Fund, Current Debt, and Overall Goals then

• Split Your Focus: 

• Allocate an amount monthly ($500 for example) you can dedicate to both debt payoff and savings.

• You can then prioritize the order of either debt payoff or goal savings and what amount of that monthly goes towards which one ($350 emergency savings and vacation fund/$150 credit cards for example).

• The below free Excel sheet does this very effectively and is a great way to bring this to life.

III. Use the below free tool to put this method into action for you today!