You’ve got some debt, but you also want to save some money. So, now what? Do you pour all extra dollars into debt repayment, or save them for a rainy day?

It’s one of the most common personal finance conundrums around, but the answer depends on a few important variables. Let’s break it down step by step so you can make the best financial choice for your situation.

Get a Real Picture of Your Finances

You need a clear picture of your current situation before making any decisions.

What do you owe? How much are the interest rates? Do you have savings? And how much do you have coming and going each month?

Understanding your whole picture of finances allows you to decide whether paying down debt or building savings should be the focus, or if both are in the cards.

Why Paying Down High-Interest Debt Matters

High-interest debt, specifically credit cards, can creepily drain your budget. With rates over 20%, owing a balance can cost you a lot, a lot more in the long run than you might think.

That’s why eliminating high-interest debt is typically the top priority. Each payment toward those balances is like giving yourself a risk-free return; something you won’t get from most savings accounts.

And aside from the numbers? Paying off debt just feels wonderful. You have greater freedom, greater peace of mind, and less worry about money.

But Don’t Skip Savings Entirely

Even while you’re tackling debt, building some savings is crucial. Without it, you’re stuck in a cycle—one emergency car repair or medical bill, and you’re back to borrowing.

Start with a small emergency fund—$500 to $1,000. That will protect you from having to resort to credit cards or loans when an unexpected expense arises. Once you have that buffer, you can focus more on debt repayment without the danger of backsliding.

The Middle Path: Do a Bit of Both

You don’t always have to choose between saving and paying off debt. In fact, finding a balance might be the best choice.

Divide your excess cash—maybe 70% to debt, 30% to savings. Alternatively, you can come up with a different proportion based on your specific requirements. The key is to continue making progress on both fronts without experiencing burnout or a plateau.

Got a bonus or a tax refund? That’s the perfect time to give both goals a boost.

Can a Loan Put You Ahead?

In some situations, taking the right kind of loan can make managing debt more affordable. For example, rolling over multiple high-interest debts into a single lower-rate loan can simplify your payments—and possibly save you cash.

This is where flexible borrowing options, such as personal lines of credit and personal loans, come into play. You might be wondering, what is a personal line of credit, and how does it differ from a credit card or a personal loan?

Well, a personal line of credit lets you have access to money up to a certain limit, which you can use as needed. You only pay interest on what you’ve used, and rates are generally less than credit cards. It is not a magic solution, but if debt consolidation or as a temporary safety net where you’d prefer to keep interest in check, it can be helpful.

Just make sure any borrowing is part of a complete plan, not a temporary fix that turns into future debt.

So, What’s the Smartest Order?

Here’s a simple rule to follow:

1. Build a small emergency fund. That first $1,000 will get you through when surprises arise.
2. Pay off high-interest debt. Especially anything over 7–8%.
3. Build your savings. For 3–6 months’ worth of expenses once you’re out of the high-interest danger zone.
4. Pay off current lower-interest debt. Car payments or student loans are not as important as paying off lower-interest debt.

It’s not about perfection—it’s about progress.

You don’t have to do it all at once. Start with something small. Make it a habit. Make changes to the plan along the way. The most important thing is to start moving in the right direction.

And if you’re still unsure, ask yourself this: What would you feel better about sleeping at night—less debt, or more cash in the bank? Your response will steer you in the right direction for now.