Should You Save or Payoff Debt? Recession Edition
Hello, happy new year, and welcome to the new and improved Savvy Budget Girl podcast and blog. My name is Wendy Coop, and today we are discussing saving money versus paying off debt.

But first, my sponsor:
Today’s episode is sponsored by my book, “Budgeting for Women.” The book is designed to help you get your money act together and learn how to budget your money to achieve your financial goals and ditch the paycheck-to-paycheck lifestyle. You can find the book on Amazon, and it is available as an ebook and physical book. Make sure you order copies for yourself and give away. Not to toot my own horn, but I think the book is pretty good!
And on a quick housekeeping note: I decided to rebrand the podcast and YouTube channel to reflect better what we actually talk about here. Though Savvy Brown Girl is a cute name, it doesn’t tell you anything. I want people to know what the show is about and make it easier for you to share it with others.
Thank you so much for your support through the first 15 episodes of Savvy Brown Girl, but it’s time for a new chapter!
Now, let’s discuss saving money!
On my YouTube channel, we often discuss savings challenges, budgets, and paying off debt. And even if we weren’t about to be in an official recession, we know that inflation has wrecked a lot of people when it comes to higher prices on goods and services. And for that reason, we are going to revisit the debate of saving money vs paying off debt.
I first talked about this all the way back in episode #1. So be sure to queue that up to listen to after this episode.
Over on the YouTube channel, I received a pretty lengthy comment reminding me that the money I kept in envelopes wasn’t doing me any good because it wasn’t earning interest in the bank, and it wasn’t paying down my debt at that point in time.
And while I appreciate the math involved in this comment, as a money coach, I’m more concerned with behavior change, rather than the math. You see, I do better when I can see and touch the money. At this time, if it’s in the bank, it’s likely going to get spent. That’s just where my habits are right now. And that doesn’t help my savings or debt payoff. And maybe you’re thinking the same thing; you want your money to work for you, but rising interest rates are making it difficult to prioritize where your money goes.
Here are some things to consider when it comes to whether you should pay off debt first or save money first:
- Are you debt free? If you are, then this really isn’t a discussion. But maybe you’re almost debt free. If you can see the end in sight that’s just a few months away, I would encourage you to go all-in on your debt payments and then save more money when you’re debt free. On the other hand, if you’re a few years away from being debt-free, then you’ll still want money in savings. It may be worth it for you to slow down your debt payments in order to save money for emergencies or urgent needs to keep you out of debt.
- Do you have an emergency fund? If you don’t have any money saved for emergencies, I would start there. It’s important to have a cushion to hedge against emergencies. Giving yourself a margin of safety between your money and life is critical for success. Even if that means taking longer to pay off debt.
Math nerds will tell you that it’s more correct to pay off high-interest debt first, but, like a certain someone says, “if you were doing math, you wouldn’t be in debt.” Remember, this is about habits and margins. How much do you need for emergencies? That will depend on your expenses, family size, employment/income situation, and more. If you want my take on the popular advice of a $1000 starter emergency fund, check out episode #7.
- Do you have a large, upcoming expense? Are you planning a vacation? Do you need a new computer? Are you moving? Things like that can put people into debt really quickly. So hedge against that with savings. Pay your minimums on the debt until you have saved up for your large purchase. Then resume the extra debt payments.
As I’ve said before, we are concerned, here, with the spending and saving habits that got you to this place of little savings and tons of debt. In order to combat this, we need to establish new habits. And one of the best ways to do this is to practice saving while avoiding new debt.
It doesn’t have to be one way or the other. You can save money and pay down debt at the same time. I would rather you take longer to pay off the debt and have money for emergencies rather than zero savings, and your only relief being your line of credit. Don’t do that to yourself!
And as for how you’re going to save money, we’ll be going into that more in a future post, but I know many of you like to do savings challenges. And I have a brand new ebook of savings challenges you can complete throughout the year. You can find it in my Etsy shop, which is linked in the show notes. Whether you choose to save $30 in 30 days to build up that savings habit or go for the 100-envelope challenge, remember you can take all the time you need to complete the challenges. Your race, your pace.
That’s all I have for you today!
Thank you so much for joining me on this first episode of the new year!
Let me know: what’s your savings goal for 2023? Tag me on IG @ savvybudgetgirl.
Wendy