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How to Pay Off Debt and Save Money at the Same Time

When asked in a 2018 poll of ESL Facebook followers asking “Which is a more important financial goal for you? Paying off debt or saving for a purchase?” Nearly 600 people responded to the poll, with 81% of respondents indicating they’re focused on paying off debt. Have you considered doing both? Below are some tips below on how to best accomplish this.

Let’s start with a scenario: Your car breaks down and requires $1,000 worth of repairs to get it back on the road. You don’t have the cash in your savings, so you put the repair on your credit card. Now you have a debt of $1,000. Sure, you may want to get rid of the balance ASAP, but if you pay off the debt and then hit a pothole you’ll be starting the cycle all over again with the next repair.

The idea is to start working toward having some money set aside for emergencies and some to pay down your debts.

Start with a Budget

No matter if you make $100 a week or $1,000 a week, if you don’t keep track of where your money is going it could disappear before you know it.

Let’s say your goal is to put $50 a month toward savings or debt. Take a look at your expenses and see where you might be able to save money, and put those funds toward your other financial goals. Changes could include things like bringing your lunch to work, brewing your coffee at home, ordering less take-out, canceling cable or some of your streaming services.

Next, consider taking that $50 and put an extra $25 toward debt payments and $25 toward your savings goals. Although bigger unexpected expenses (like repairs and maintenance) might not be needed every month, it’s worth setting aside a little each month to prepare for when those expenses do come.

Importance of an Emergency Fund

The example mentioned earlier is a great illustration of why an emergency fund is so critical. Life often presents you with unexpected costs: something in the home breaks, family emergencies, you lose hours at work or your job. In all of these cases, having funds set aside can help reduce anxiety about the situation because you know you have some (or all) of the funds covered. A good rule of thumb is three to six months’ worth of living expenses. If that amount sounds like too much, set up an automatic transfer with your financial institution of $5 per week into a savings account. You’ll start seeing the balance grow, and you can increase the contribution amount as you feel more confident.

Automate and Pay Yourself First

Pay yourself first. What does that mean? When you first get your paycheck, before you do anything else, set aside a few dollars aside into a separate savings account. You can also set this up to happen automatically in several ways:

  • Talk with your financial institution, and set up an automatic transfer from your checking into a savings account a few times a month. Many institutions even allow you to set up recurring transfers from your phone app or online banking page.
  • Split your paycheck’s direct deposit to have a portion of each paycheck deposited right into your savings account. Talk with your employer’s HR rep to help set up this change.

In either case, paying yourself first and automating the savings process are some of the simplest ways to watch your savings balance grow and your debts shrink.


While it can be tempting to aggressively pay down outstanding debts, it’s important to maintain a balance between increasing your savings and paying down debt. Be sure to have a budget, and track where your expenses are going. Start and maintain an emergency fund with three to six months of expenses, and look for ways to pay yourself first.

For additional ways to increase confidence in your finances, check out the Educational Resources section. ESL also partners with CCCS of Rochester to offer budget counseling and debt management plans to Rochester area customers.