Can you still save while paying off debt?

By Joshua White

Debt is a multifaceted burden that many have to face. Apart from creating financial stress in the present, it can easily impede a person’s ability to save for the future.

We asked Brendan Dale, personal finance editor of the blog Take Charge of Your Money, whether it's possible to save money while simultaneously paying off debt.

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Can you save money while paying off debt?

Dale says, “Yes, absolutely - provided of course that you are not in arrears on any accounts, and that your cash flow allows for extra saving.”

He does point out, however, that the costliness of short-term debt is an important factor to consider.

“You may be paying over 15% interest on your credit card, while your savings account probably only earns 2.5% interest.

“Looking at it like this, you can see that it makes sense to pay off your debts as soon as possible. This doesn't mean that you can't save though.”

In particular, Dale strongly recommends saving towards an emergency fund.

“The reason for this is that life is unpredictable. Just as you think that you're on top of things, something pops up. Having an emergency fund will help you get through the tough periods while still honouring your debts.”

How can this be achieved?

Setting aside savings while paying off debt requires meticulous management. As Dale explains, “It requires a bit of a balancing act, especially if your budget is tight. Your first priorities should be maintaining a stable cash flow and making it through the month without getting into more debt.”

Dale offers a plan that you can follow.

“Start by listing all your debt payments, financial commitments, and living expenses. Be realistic about whether you can maintain it all and have something left over at the end of the month.

"Planning on a month-to-month basis will help you manage your cash flow and save money at a sustainable pace. Some months will allow for more savings while other months may be tough," he says.

“Always remember to spend less than you earn, even if that means saving a little less that month. Rather save less than create more debt.” 

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