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Financing Your Life Excerpt: Payoff Debt or Save More?

FYLstyle2_large(square)Today’s excerpt is from the Financing Your Life workbook. It’s taken from Chapter 14: Paying Off Debt

Payoff Debt or Save More?

Deciding whether to dedicate more funds toward debt repayment or savings is a real conundrum for many. As with most financial matters, there is no one-size-fits-all answer here. It is always important, however, not to sacrifice one for the other. You should always be saving money even while trying to accelerate your debt payments. Some points that may help you decide between the two activities include:

  • In an emergency, credit cards are not reliable. If you favor paying off credit card balances over creating sufficient emergency savings, you may think you’ll be okay because you could always use your credit cards—now paid off—in the event of an emergency. But not only will that make the emergency even more expensive to deal with, credit card limits can be lowered at the discretion of the creditor, which means you might not even have the available funds you think you have. What you will always have is the available balance of your emergency savings account.
  • Mortgage interest and student loan interest are deductible. Instead of aggressively paying off these two debts, you might be better off putting the funds into savings and offsetting your interest expenses with the tax savings you receive.
  • It isn’t just wasteful spending that creates debt—need can create it too. If you don’t save, you will be forced to rely more and more on credit and loans as you age. By saving, you might not lower your current debt, but you reduce the chances of having future debts.


A workable, reliable financial plan isn’t about having a ton of money, a budget with absolutely no waste, allowing yourself no room for fun, or living a completely debt-free existence. It’s about creating a balance between debt, saving and spending that works for you and your family.

When you find this balance, not only will the plan itself become self-propelling, it will also allow for a more harmonious existence for you and your loved ones as well as safety and success in your financial future.

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About Dennis M. Postema

Dennis M. Postema, RFC, is a successful entrepreneur, best-selling author, coach, speaker and registered financial consultant. He is the founder of MotivationandSuccess.com, StoriesofPerseverance.org, FinancingYourLife.com and TheRetirementInstitute.org.

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