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Growing Your Savings When You’re Saddled with Debt


Paying your debts can be a long and trying process. Unfortunately, most people in the US today are familiar with the ups and downs of debt repayment considering the popularity of credit card debt. It’s true that minimizing your liabilities is one of the things that can bring you joy, but it often feels like stashing your valuable cash away.

Most people don’t know whether they should focus on debt repayment or they should juggle the task with saving. Depending on your financial status, saving while still handling your debts can be a rewarding decision.

Make the minimum debt payment and save

If you don’t have an emergency fund to deal with unforeseen expenses, its time you focused on saving some cash. When you are struggling with debt, it can be heartbreaking when you plunge into deeper debts because an emergency expense came up and you had to borrow some more money. By the time you pay the debt in full, it’s likely that you’ll deal with an emergency expense that demands some sizable cash.

Before committing your money to debt repayment, save some cash for an emergency expense. This will not only prevent you from getting into more debt, but it will also ensure you have a peace of mind knowing there is a soft landing when push comes to shove.

Invest while making debt repayments

When you have successfully saved some money for emergency expenses, it’s important to ensure you are getting high returns. You can get good returns by investing the money wisely but other people prefer making quick repayments towards their debt.

Normally, investing in stocks earns about 5% after deducting all the associated fees and taxes. If your loans come with interest rates that are below 5%, then it would be wise to invest rather than focus on debt repayment. Both auto loans and mortgages are characterized by low interests and you can make minimum payments for a long time. On the other hand, credit card debt has high-interest rates than most payday loans.

However, you need to make sure the returns on the investments are higher than you are paying for the debt. This means you can use the proceeds from the investments to clear the debts while still growing your investments.

When to focus on debt repayment

When you have significant saving savings in your account and you are certain it’s enough to take care of all the irregular expenses as well as emergencies, you can think about aggressive debt repayment. However, this is only necessary if the debt in question comes with high interest rates. For instance, most credit card debts will slap you with high-interest rates and it’s not easy to find investment options with returns that can offset the deficit.

Because consumer debt is expensive, focus on settling the ones with high-interest rates before moving to the next. While it’s not easy to fathom, clearing your debts ensures you are not losing money by paying high interests. At first, it can be challenging but living a debt free life has a way of helping you live a better and less-stressful life. In addition, paying the debts leaves you with a lower monthly bill and you can comfortably invest for a better future.

Debt payoff and savings allocation

With debt payoff, you can use similar strategies used in investment allocations only that this time you will split the money between savings and debt repayment. The first thing is to determine the most appropriate percentage of your money should go to each task. The numbers can be different depending on your financial status but it’s important to come up with a reasonable number.

When you work with the amount of money you can comfortably dedicate to debts, it’s easy to strike a balance between savings and debt settlement. For instance, you can start with a 60/40 plan where you direct 60% of the allocation towards debt and the remaining 40% towards savings. This formula can be implemented every time you get some additional income.

You can change the allocations depending on your preferences and the milestones you’ve achieved on your journey to a debt-free life.

Is it sustainable?

Most people are conflicted by the notion of striving to save money when bearing a heavy debt burden. Ideally, the idea is to help you create a healthy mindset that will ensure you will have an excellent financial future. The habit of saving is elusive for many Americans and it’s the reason for massive debts.

The moment you form a habit of saving some money, you are on the highway to financial freedom. Saving when you are in debt is no mean feat, but once you get used to it, it will be much easier to save when you are not dealing with any debts. In addition, it helps you boost your cash reserves so that you have something to count on when the unexpected happens.

If you can stick to the savings plan for the entire period you’ll be paying the debt, you’ll have some good savings by the time you clear the debts. Besides, you’ll have developed the right savings mindset.


Dealing with debt can be hard for most people but it shouldn’t scare you to stop planning for the future. Savings can safeguard your future in many ways. Therefore it shouldn’t be left unattended simply because you are saddled with debt.

By starting small, you can achieve huge milestones not just with the loan repayment but also with a change of mind. But all in all, you have to make a decision to start the process of debt elimination and savings today.

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