Saving money vs. paying off debt is one of the most common personal finance debates you’ll ever run into. It’s a question that sparks strong opinions, endless blog posts, and conflicting advice from experts.
If you’re just getting started on your financial journey, this decision can feel overwhelming. A few years ago, I found myself in the exact same spot. I researched, ran numbers, listened to podcasts, and read every money book I could find, yet I still couldn’t decide what to prioritize.
Many experts argue for one strategy over the other. Many personal stories reveal strong results with both approaches. And for beginners trying to figure out the right path? It truly can feel like a financial conundrum.
Below is what I learned through my own experience, plus the factors that can help you decide which priority makes the most sense for you.
Saving Money vs. Paying Off Debt: Understanding the Dilemma
If you look strictly at the math, paying off debt seems like the obvious answer. High-interest loans cost you money every month, and eliminating them guarantees a return equal to the interest rate.
But real life isn’t just math. Your financial goals, current circumstances, and tolerance for risk all matter just as much.
Back in 2014, I was a personal finance beginner with a mix of student loans, car debt, and a history of credit card balances I had finally paid off. At the same time, I barely had anything saved and had almost no retirement contributions.
Even after weeks of research, I couldn’t decide. I kept worrying I’d choose wrong and derail my financial future. That fear (combined with inexperience) made the decision even harder.
Eventually, I realized this wasn’t just a math problem. It was a lifestyle decision.
When Saving Money Should Come First
A surprising 20% of Americans save none of their annual income, and many who do save aren’t setting aside nearly enough. For people with very little savings, building a financial cushion is essential.
The biggest reason to prioritize saving is simple: an emergency fund.
If you don’t have at least a small cash buffer, even a minor setback, a flat tire, a medical bill, a missed paycheck, can send you right back into debt. Saving a few months of expenses protects you from constantly living in crisis mode and reduces financial stress.
Another reason to save first is if your current debts have low interest rates. If you’re not getting crushed by double-digit interest, building savings may create more long-term stability.
Retirement savings also matter. If your employer offers a 401(k) match, contributing enough to get that match should be a priority. It’s essentially free money, and delaying retirement savings costs you valuable compound growth. Every year you put off investing is a year you can’t get back.
Skipping these opportunities can mean losing thousands (or tens of thousands) of dollars over time.
When Paying Off Debt Should Come First
Consumer debt, especially credit card debt, can be brutally expensive. In 2018, revolving consumer debt reached $1.039 trillion, and interest rates on credit cards regularly exceed 20%.
My own Visa sits at a staggering 23% interest. Carrying large balances at rates like that is financial quicksand. You can’t save or invest your way out of a double-digit interest rate, the math simply doesn’t work.
When your debt is growing faster than your savings would, paying off debt becomes the smarter priority. There’s almost no investment on the market that consistently beats a 17%–25% interest rate.
Another benefit of paying off debt early is freeing up monthly cash flow. At one point, I was paying $321 per month on my car loan and another $312 on student loans, over $630 every month. Eliminating those payments would instantly give me thousands of dollars per year to redirect toward savings and investing.
This tug-of-war made the decision even harder for me because both sides seemed equally urgent.
Choosing Both: A Balanced Strategy
Eventually, I chose a middle path: I split my efforts between saving and paying off debt.
Was it the “right” decision financially? Maybe not, according to pure math. But it was the right choice for me emotionally and practically and those things matter too.
At the time, I still had about $18,000 in student loans and $13,000 left on my car. My highest interest rate was 6%, which is annoying but not devastating. I paid minimums on my loans while increasing my savings rate and focusing on earning more money.
Whenever my income went up, I used some of it for extra debt payments and some to boost savings. Gradually, the balance began shifting in my favor.
By 2017, I had built a comfortable savings cushion and paid off my car loan. That freed up another $320 per month, which I redirected into savings and investing. Today, I have over $70,000 invested and saved and only $4,000 of student debt remaining.
Could I have saved more money in interest by being more aggressive with debt? Sure. But I also would’ve lost years of compounding and missed out on experiences like travel that enriched my life during that time.
Most importantly, I found peace with the decision. And that peace made it easier to stay consistent, which is the real key to financial success.
Final Thoughts
Choosing between saving money and paying off debt is a decision almost everyone wrestles with. There isn’t always a clear winner, and plenty of experts passionately defend both strategies.
The truth is that the right choice depends on your financial goals, personality, and circumstances. You might save first, pay off debt first, or split your efforts like I did.
Either way, you’re making progress. You’re taking control. And you’re moving your finances in the right direction.
No matter which path you choose, you’re choosing a financial win and that’s what matters most.