Deciding whether to use cash to pay off debt or to cushion a savings account can be a difficult undertaking. For some, it’s one route or the other, and for certain individuals it’s a delicate balance of both. Utilize the following tips to determine your best course of action.

Budget Is Important

Regardless of whether you decide to put your money into savings or pay off lingering debt, it’s essential that you maintain a tight budget in the meantime. We’ve talked about how to save money through easy changes, but it’s always a good idea to continue looking for ways to cut costs and get rid of unnecessary spending habits. Avoid spending money on eating out. There are a variety of recipes that make breakfast, lunch, and dinner all delicious and thrifty meals. Anything saved can go to your choice of priority, whether it be a savings account or credit payment.

Get the Numbers

Finding out the true number of overall debt you’ve incurred can feel like a stab in the gut, but it’s a necessary evil. Knowing what you owe is the only way you can make an informed decision on whether to save your money or devote yourself to paying off debt. There are tools available, like this one from Suze Orman, to help you determine your numbers, or you can do it the old-fashioned way with pen and paper. List your debts or loans in order from lowest to highest, and write the interest rates next to each. Organization can help you from becoming overwhelmed, and will help if you do decide to take your finances to a professional.

Emergency Savings

Everyone needs to have an emergency savings account and if you don’t already, start one now. General financial guidelines suggest a savings account containing enough money to cover at least three months of living expenses, and you can even perform a personal assessment with a tool like the emergency savings plan from Hello Wallet. Even if money is currently tight, emergencies can happen at any time. You don’t want to incur more debt from unexpected medical bills, transportation costs, or natural disasters. The list of potential emergency situations that could arise is extensive, and therefore a basic savings account is nonnegotiable and should come before paying off debt.

Debt Costs More Than You Know

List out the interest rates of any credit line you currently owe money on. Paying off the highest interest rates will save you a substantial amount of money in the long run, as opposed to adding money to a savings account that makes you a single percent of interest per year. Multiplying your debt by a decimal percentage rate will let you know how much interest costs you. Generally, it’s better to pay off credit card debt before things like student loans, as the latter tends to come with lower interest rates.

Dastardly Debt

If you find that some of your debt is pretty serious, you should do everything you can to get rid of it. For example, if you owe taxes, you may want to check out solutions like the IRS fresh start initiative. Contact a tax professional to see if you are eligible, as this program could help you reduce your debt while also saving you a lot of money in the long run. Handing over stressful tax responsibilities can save you headaches and heartaches should any legal issues come up.

Future Plans

If you dream of taking an expensive vacation, paying for a college education, or putting the down payment on a home, it might be a better idea to put your money towards saving. However, for those who are greatly affected by the worries of debt, it’s better to be debt-free before starting a new endeavor. This requires a personal and honest assessment of whether you could handle the stress of looming debt while investing money into something new.

What’s Your Income Forecast?

Will you soon be receiving a monetary gift? Inheriting a chunk of change from the estate of a family member? If you have money soon coming that you can bank on, like a paycheck or tax return, you have more wiggle room in terms of saving or paying off debt. If so, it may be in your best interest to split your income on both savings and debt relief.

Your answer is completely dependent on your current situation. It may be that you need to focus on savings first, or it could be that paying off your debt is the most beneficial plan for your needs. Perhaps a mixture of the two will best fit your priorities. Whatever the case, it’s best to nail down a plan as soon as possible so follow this advice and regain control of your finances.

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Vicky Charles

Vicky is a single mother, writer and card reader.

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