Categories FINANCE


You’ve committed to Living Within Your Means, but now, how do you decide whether you’re going to pay of debt or save money? Which is the smarter choice?

You want to get out of debt, but you’ve been told that you must have savings set aside. If you don’t have enough money to go around already, how do you prioritize? There isn’t one way to answer this question, but you can decide which one is better for you and your family by assessing your financial situation and consider these scenarios. 

How to Decide Whether to Pay Off Debt or Save Money, even when you don't have much to go around.

Build Your Budget

In order to properly allocate money, you need to know exactly how much money you have. When creating your monthly budget, decide how much will go towards your necessities (home, utilities, transportation), and then calculate how much you’ll spend on food.

Anything left over should be used to either pay off debt or deposited into a savings account. You’ll notice that the budget for this dilemma is a bare bones budget – you only spend on what you really, really need. In order to get out of debt faster, you’re going to have to make some sacrifices here. It won’t last forever, but it will take some getting used to.

The best part is when you’re done, you won’t have a difficult time continuing on with the simplistic lifestyle. It’s pretty great, if I’m honest.

Pay Off Debt or Save Money

Now, you have an amount set aside for either of these actions. If you have debts with high interest rates (credit cards, private student loans), you’ll want to prioritize those items. Next, allocate an amount towards debts with lower interest rates (government student loans).

The goal is to get rid of debt AND set aside savings, because you always need to have money set aside, regardless of your circumstances. Emergencies happen, so you must be prepared. Minimum emergency savings should total at least $1000. If you’re not there, you should be working towards this goal.

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Prioritizing Payments

To calculate amounts to pay your debts, you’ll need all of your debt balances as well as interest rates. First, consider your high interest debts. You want to pay these off as quickly as possible, because the longer you take to pay them, the more interest you pay and the more money you will lose.

For lower interest debts, commit to paying the minimum balance every month until you pay off your higher interest debts. Afterwards, you use the money you were putting towards those higher debts into your remaining debts.

When it comes to savings, some employers provide a “match program”. With these programs, you invest a percentage of your paycheck into a 401K or similar, and your employer will match your investment up to a certain amount/percentage. This is free money. Take advantage of it, because this is money set aside for your future (retirement).

After calculating how much you must pay towards debt, any leftover will go towards your savings. If you want numbers, I would recommend setting aside at least 20% of your income towards savings, and allocating the rest towards necessities and debts.

Importance of Financial Goals

Without a solid Financial Goals Plan, you will have a difficult time visualizing your path to financial freedom. It doesn’t take long to create a game plan, but I do understand that if it’s out of sight, it’s out of your mind.

When dealing with finances, this mentality is never healthy. You should know exactly how much money you’re bringing in, how much is going out, and where it’s all going.

Remember this – “You’ve got to tell your money what to do, or it will leave.” – Dave Ramsey

Once you’ve mastered this mentality, you will get yourself out of debt faster, save and invest more, and realize the value of your time. Do you want to spend your time working for the rest of your life, or do you want to start building financial freedom now so that you can enjoy life later? It’s up to you.

Start building your goal plan with my Free Financial Goals Planner & Tracker. Grab it with the form below. Happy savings!

Ashlynn Cueto

INFJ, Ravenclaw Blogger. Headquarters: Houston, TX. Making this my most creative and rewarding life. This blog is my hustle, and I'm here to help make your creativity yours.



  • This gave me lots to think about! I really need to pay attention to which one of my 2 credit cards has the higher rate and pay more on it to pay off faster.

    • I’m glad! Credit cards really know where to hit ya!

  • Jodie.Mitch

    I’m trying so hard to save at the moment! I’m trying to take out an affordable amount each week and then whatever’s leftover at the end of the month but it’s hardddd

    • Lol! Yes, it is hard, but you’ll get there. When you see the funds building up and how well you’re doing, that’ll be motivation too. Good luck, Jodie!

  • Melina Pena

    I don’t allow myself to owe any debt on any of my credit cards, so anything I use throughout the month I pay right away. Recently I have been paying off my student loan. I’ve take off a significant amount and it makes me feel so good about myself! Whenever I have some spare money, I put it towards my loans. Adulting may not always be fun, but it’s worth it in the end! Great post as always Ashlynn xxx

    Melina |

    • That is so awesome! It’s the perfect way to handle credit cards. I have a ton of student loans too, but I think almost every educated person does. Thanks, Melina!

  • This is such an important lesson to learn! Finances are so complicated and tough to understand, especially because everyone’s financial situation is so different and there’s no one-plan-fits-all when it comes to finances. Love how easy you lay out everything in this post.


    • Thanks, Jenn! I agree – finances can be so tricky, and I’m trying to simplify everything, so thank you for that!

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