Money·3 min read

How to Save for Emergencies While Paying Off Debt

Saving and Paying off Debt Image
June 26, 2020

The Story

Juggling one ball is easy. The more you add, the more complicated it gets. Now substitute “ball” for “money goal,” and you’ll see what we mean.

Right. So how do I save and pay off debt at the same time?

Think about what each one does for you. Having savings in the bank can help you buy beyond the basics. But debt is like quicksand. Once you’re in, it’s hard to get out. And the longer you wait to pay it off, the more you spend on interest.

Translation: both can feel like they deserve to be your top priority. Which is why a lot of people end up throwing random amounts toward both goals. And don’t make progress on either.

That’s also because I’m not made of money.

Yeah – there's that. There’s only so much to go around after paying for the things you need. Experts usually recommend using 20% of your paycheck for goals like saving and paying down debt. If that’s a stretch, spend some QT with your budget and figure out what’s more realistic right now.

Then how do I split it up?

First things first: you have to pay the minimums on your debt each month. After that, if you haven’t started saving yet, put every dollar you can into an emergency fund. Otherwise, getting a bad financial surprise while you’re paying off debt may mean you have to rack up new debt to cover it. Eventually, you’ll want three to six months’ worth of take-home pay saved. But aim for a starter goal of saving one month’s worth.

What comes after that?

It depends on your debt. If your interest rate is in the double digits – that’s usually stuff like credit card debt or personal loans – you probably want to put most (or all) of your “goals” budget on paying it off. After you’re done, switch back to saving. 

Pro tip: look up balance-transfer deals to save money on interest. Some credit card companies offer low or no interest if you move your balance to a new account. But read the fine print. That new interest rate might expire at some point. Do the math to make sure the odds of paying off your debt by the deadline are in your favor.

What about student loans and mortgages?

They usually have lower interest rates, so paying them off is less of a fire drill. Once you’re done with high-interest debt, you can stick with saving until you cross the emergency fund finish line. Then work on the other stuff you want to save for as you keep up with these payments.


Saving and paying off debt at the same time can be a recipe for getting nothing done if you don’t plan. Consider your budget, current savings balance, and type of debt to help you strategize the best way to check both goals off your list.

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