How to Save & Pay Off Debt

Saving money for the future and paying off debts don't logically seem to go together. However, the two acts go hand-in-hand when it comes to creating a comfortable, debt-free future. Building up your savings means you'll be less likely to go into debt for unexpected expenses or emergencies, while paying off debt ensures you will have more money to save if you aren't spending it all repaying debts and interest. Adjust your lifestyle and budget so you can get a handle on your financial status.

Create a household budget which cuts out all unnecessary expenses. Trimming your budget should still allow for a certain amount of discretionary spending money to avoid feeling trapped or "broke." For example, limit yourself to one latte each week instead of indulging every morning.

Pay the minimum monthly payments on all your accounts, while you build an emergency fund of at least $1,000 if you don't already have one.

Aggressively pay down your debt, either attacking the smallest debt first or the highest interest rate first, depending on your needs. If you need to see bills disappearing, pay off the smallest balance first. If you want to save money by eliminating interest, pay off the account that charges the most interest first. CNN's Clark Howard suggests using two-thirds of your extra money to pay down debt, while saving the additional one-third if you're intent on building your savings account balance while paying down your debt. Otherwise, build an emergency savings, pay off debt and then aggressively build your savings. You should also pay cash for everything to avoid getting in debt again.


  • Use your savings for unexpected emergencies, such as replacing your refrigerator that just died, rather than putting the expense on a credit card.
  • Keep two to four accounts open, preferably your oldest accounts, to keep your credit score up. Charge something on them every few months or set up recurring payments to automatically charge to the cards to keep them active. Pay them off in full each month to avoid paying interest.

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About the Author

Janece Bass is a freelance writer specializing in weddings, family, health, parenting, relationships, dating, decorating, travel, music and sports. She has been writing for more than 15 years and has numerous published pieces on various websites and blogs. Bass has also ghostwritten various fiction-based novels.