Should I Save Money While Paying Off Debt?

05 Oct Should I Save Money While Paying Off Debt?

Dear Matt,
While someone is doing their debt snowball should they also be saving money? We completed lesson 3 [of Dave Ramsey’s Financial Peace University] and the class is working on their budgets. Charitable contributions of course is at that top of the form and then savings is next (5-10%). We have our emergency fund but have not put a lot of money towards savings because we are still working our debt snowball. Although we feel at times we could use more money in our emergency fund/savings. What do you think? Thanks and have a great day.

Great question Terry. I think you have to look at this in terms of the opportunity cost. If I save more while paying off the debt, then it will take me longer to save and longer to pay off the debt. If I focus on the debt first, the savings has to wait but I have more money to pay off the debt faster, and then I can focus on boosting my savings as quickly as possible. Usually we recommend focusing with intensity on the debt snowball for that same reason. Get it done with a vengeance and the save money with a vengeance.

Now a certain amount of comfort level comes into play here. For people with low incomes, $1,000 is a lot of money for an emergency. For people with high incomes, $1,000 probably isn’t enough, and they need $2,000 or so. You have to know that you?re comfortable with that amount of money in the bank and understand between spouses exactly what that money will be used for. Once you agree on the criteria for spending that money, it makes it a little easier to feel comfortable with that $1,000 in the bank and you can calmly focus on the debt snowball.

– Matt Wegner

Matt Wegner is a finance and business coach dedicated to teaching the principles of successfully living debt free. Learn more at

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