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What to Do First: Save Money or Pay-off Debt?

What to Do First: Save Money or Pay-off Debt?

Contributions done by: Mikayla Orser & JW Rayhons 

You’re at your wits-end with your finances. You’re not sure who to turn to, or what advice to believe. So, you begin doing research; this research has led you to many conclusions about steps to handle your debt, plan for your future, and become financially free. However, you still aren’t sure exactly what to do. Collectively, American’s owe 10 percent of their disposable income to non-mortgage debts like car loans, credit card accounts and student or personal loans (Lexington Law, 2020).

The truth behind what to do first is “simply” to do both. That’s the short answer, but it’s a little more complicated than that. Your situation is different than your brother, sister, or neighbors; keeping this in mind you will need to create a plan that works for you. Irby states, “you might need to adopt a blended approach…” (2020). By implementing this blended approach, you should take into consideration your debt, income, and goals.

Your Debt

The first item you should be mindful of is your debt. Consider your “bad debt” (e.g. credit cards, auto loans, personal loans, and potentially student loans), Scott recommends keeping a separate spreadsheet or list of all your debts (2020). This will help you create a debt pay-off friendly budget, which she talks about in her article, 6 Step Plan to Pay Off Debt and Save Money.

Your Income

The second item you should be mindful of is your income. Understanding how much money you make after taxes will help tremendously. Included in understanding your income, it is important to be mindful of your monthly expenses. You will need to know how much of your income you are spending, and how much you have left over every month.

Your Goals

This probably one of the most important items to keep on your mind. Your goals will guide your budget and spending habits. Set clear, specific, and achievable goals tailored for your financial situation. The goals you set should include paying off your debt and saving at the same time.

Things to Remember

When you are implementing this blended approach it’s important to remember a few things. Latoya Irby from The Balance states it this way:

  1. If you pay off your debt first and put no money in savings, the downside is that you’ll have nothing but your credit cards to fall back on.
  2. If you save first and don’t focus on paying down your debt, you’ll pay more money over time in interest charges.
  3. If you have debt with a low-interest rate, it makes better sense to put most of your extra money into saving first.

By keeping these three points in mind you may be able to choose the best approach for your debt pay-off and savings goals. We encourage you to reach out to a financial professional for more help, if you so need it. They are here to help and answer any questions you might have.



If you are looking for a financial advisor team focused on your unique financial situation, communicates openly, and that puts you and your goals at the center of the relationship, call us at (480) 507-2425 or contact us online. We’d love to meet you. 


Mikayla Orser is a Non-Registered Associated Person with Cetera Advisor Networks, LLC. Mikayla cannot offer securities or advisory services.

 The content in this article was prepared by the article’s author. Cetera Advisor Networks, LLC does not endorse its content, and the views expressed may not necessarily reflect those held by Cetera Advisor Networks, LLC.


Irby, L. 2020 Apr. 2. Should You Save Money or Pay Off Debt? Thebalance.com. Retrieved from: https://www.thebalance.com/should-you-save-money-or-pay-off-debt-960844#:~:text=Should%20You%20Save%20Money%20or%20Pay%20Off%20Debt%3F,The%20Best%20Approach%20Is%20to%20Pay%20Both.%20

Lexington Law. 2020 Feb. 19. 2020 Consumer Debt Statistics. Lexingtonlaw.com. Retrieved from: https://www.lexingtonlaw.com/blog/loans/consumer-debt-statistics-2019.html

Scott, L. n.d. 6 Step Plan to Pay Off Debt and Save Money. Lifeandabudget.com. Retrieved from: https://lifeandabudget.com/6-step-plan-pay-off-debt-save-money/#:~:text=How%20to%20Pay%20Off%20Debt%20and%20Save%20Money,5%20Make%20it%20automatic.%20...%20More%20items...%20