Paying off debt can feel like a full-time job. It’s emotional. It’s exhausting. And it can feel like the only thing you should be doing with your money. But here’s the truth: Even while you’re paying down debt, you need to be saving too.
I know, I know—when you’re juggling credit card bills, student loans, and trying to keep your budget afloat, saving might seem impossible. But you don’t have to choose one or the other. You can do both. In fact, doing both is exactly how you build financial stability.
Let’s talk about how to make it work—step by step, in real life.
Start With the Basics: Make Your Minimum Payments
Before anything else, make sure you’re making the minimum payments on all your debts, every single month. This is the bare minimum to protect your credit score and avoid late fees. If you miss payments, it gets harder to catch up—and more expensive, too.
Think of this as your financial “must-do.” Once this is taken care of, you can start building forward.
Step One: Build a Small Emergency Fund
Next up: savings. Yes, even now. If you don’t have anything set aside, start with a goal of $500 to $1,000. This is your safety net for when the unexpected happens—because it will happen. A flat tire. A vet bill. A trip to the ER. And when it does, you’ll want to reach for cash, not a credit card.
Open a separate savings account—ideally a high-yield one—and automate a small deposit from every paycheck. It could be $10. It could be $50. Just get started. Small steps lead to big results.
Step Two: Don’t Miss Out on Free Money
If your employer offers a retirement plan with a match, contribute enough to get the full match. This is non-negotiable. It’s free money. And you won’t be able to go back and get it later.
Let’s say your company matches 3% of your salary. You contribute 3%, they match it—now you’re saving 6%. It adds up fast, and thanks to compound interest, the earlier you start, the better.
Even if you’re deep in debt, don’t skip the match. This is one of the few places where you can double your money instantly.
Step Three: Focus on Toxic Debt
Once you’ve got your starter savings and you’re getting the employer match, turn your attention to high-interest debt. That’s credit cards, payday loans, rent-to-own agreements—anything with an interest rate above 15%.
This kind of debt is expensive. It grows quickly. And it can keep you stuck.
There are two great strategies to pay it down:
- The Snowball Method: Pay off the smallest balance first. Then roll that payment onto the next smallest. You build momentum—and confidence.
- The Avalanche Method: Pay off the debt with the highest interest rate first. You save more on interest in the long run.
Both methods work. Pick the one that keeps you motivated and moving forward.
Step Four: Grow Your Emergency Fund
With the worst debt behind you, now’s the time to build a bigger emergency fund. Aim for 3 to 6 months’ worth of essential expenses—things like rent, groceries, insurance, and your minimum payments.
That may sound like a lot, but you don’t have to do it all at once. Keep using your budget to set aside a little each month. And keep that money in a savings account where it’s easy to access, but not easy to spend.
This fund is what keeps you out of debt when life throws something big your way.
Step Five: Balance the Rest
Now you’re ready to balance long-term savings with remaining debt. Keep paying down lower-interest debts (like student loans or car loans) while increasing your retirement savings.
If you were only contributing enough to get your employer’s match, try bumping it up by 1% each year. The goal is to eventually save 15% of your gross income toward retirement—but you don’t need to get there overnight.
And if your job doesn’t offer a retirement plan? You’ve got options. Open a Roth IRA or traditional IRA and start building your future on your own terms.
A Few Extra Tips That Help:
- Use the 50/30/20 rule as a guide: 50% of your take-home pay goes to needs, 30% to wants, and 20% to debt payments and savings.
- Track your progress. Watching your savings grow and your balances shrink is incredibly motivating.
- Trim the fluff. Cutting one or two unnecessary subscriptions can redirect $30–$50 a month to savings or debt.
- Side hustle smart. A few extra hours a week can go straight into your emergency fund or toward your next big debt payment.
The Bottom Line: You Don’t Have to Choose
You can pay off debt and save at the same time. And you don’t have to be perfect to make progress.
Start where you are. Do what you can. Celebrate every small win—because they add up. You’re building a more secure, more flexible financial future. One step at a time.
Daniel