It’s about weighing the numbers and assessing your risk tolerance and priorities.
Strive to strike a balance that keeps you moving forwardaddressing today’s challenges while safeguarding tomorrow’s opportunities.
Like all financial decisions, think things through and give a shot to simplify the debate.
How do you use one to get the next instead of looking at them individually?"
The experts weigh in to help you develop a strategy that works best for you.
Going extreme on one and pushing the other too far aside isn’t the best option.
“When I was 21, I had $30,000 in debt.
I put every spare dollar toward paying it off, thinking I was doing the right thing.
She started saving while paying down her balances.
Deal with debt
Debt can’t be totally ignored, of course.
Thomas Maluck, a National Financial Educators Councilcertified financial education instructor, offers some guidance.
He says to at least make minimum payments on your debt.
“Don’t take on penalties or hits to your credit score by avoiding debt to build savings.
Once that minimum is paid, put some money toward your emergency fund.
We’re talking about crises that would make a loan or credit card look like child’s play.
Saving up at least three months' worth of expenses is a good buffer,” he says.
Next, put together your debt list.
Which debt has the largest interest rate?
If you owe credit card debt, it likely has a double-digit interest rate.
When to prioritize saving
There are times when saving should take priority.
Matluck says to compare your single-digit interest-rate debts and available high-yield savings accounts.
“For some folks, though, paid off debt is the ultimate money saver and source of security.
The psychological benefits of owing zero debt are uniquely valuable from person to person,” says Maluck.
