Want To Achieve Bigger Goals? Pay Your Debt Off
Saving money while paying off debt can feel like walking a tightrope — like you’re trying to secure your future without ignoring your bills. For years, it was hard for us to save money because we had mounds of student loan debt. Currently, we’re on our last debt which are my student loans. All of my paycheck goes to paying it down. I get paid daily so this helps a lot and makes me feel like we are winning everyday.
Many people assume they must focus on one or the other, but the truth is you can (and should) do both. You can reduce your debt, grow your savings, and build financial stability for you and your family. The current balance of my student loans is $24,254. Seems like a mountain, but it’s actually small compared to how far we’ve come in less than a year.
11 months ago we paid off my husband’s truck ($25k). And before that we had medical and credit card debt.
This year I turned 5o and it’s our goal to be debt free before my 51st birthday. We are projected to achieve our goals by February 2026. And I am so excited!
In this guide, we’ll explore practical, proven ways to save money while still making progress on your debt, so you can reach financial freedom faster.
Why Saving While Paying Off Debt Is Important
If you have debt, it’s tempting to put every spare dollar toward paying it down. While aggressive debt repayment can save you interest over time, it leaves you vulnerable to unexpected expenses. I agree with what Dave’s Ramsey says. Without an emergency fund, even a small emergency — a car repair, medical bill, or broken appliance — can push you back into more debt.
Here’s why a balanced approach matters:
- Emergency Cushion – Having a small savings fund prevents you from using credit cards for unplanned expenses.
- Peace of Mind – Knowing you have backup funds reduces financial stress.
- Progress on Both Fronts – You can still reduce your debt while building a secure foundation for the future.
Step 1: Build a Starter Emergency Fund
Before putting extra money toward debt, save at least $1,000 in a separate savings account. We set up a few savings accounts. This helps us to manage our money well. One is our emergency fund. And the others are for taxes and other unexpected things that could pop up in our budget. This small emergency fund acts as a safety net so that one unexpected bill doesn’t undo months of hard work.
Tips for building your starter fund quickly:
- Sell unused items online or have a garage sale.
- Flip items from thrift stores
- Pick up a short-term side hustle like food delivery, tutoring, or freelancing.
- Reduce spending (e.g., eating out, subscription services) for a month or two.
- If you’re good at something offer a service in a community social media group
Step 2: Choose the Right Debt Repayment Method
The way you tackle your debt can make a big difference in your ability to save simultaneously. Two popular methods are:
1. Debt Snowball Method
- Pay off debts from smallest to largest balance, regardless of interest rate.
- Each time you pay off a debt, roll that payment into the next one.
- Motivating because you see quick wins.
2. Debt Avalanche Method
- Focus on paying off debts with the highest interest rate first.
- Saves more money on interest in the long run.
- Best for people who want maximum financial efficiency. If you struggle to stay motivated, start with the snowball method.
There is the avalanche method to paying off debt.
I wasn’t going to add this one but we actually did it for two car payments. If you follow Dave Ramsey then you know he doesn’t recommend this method. Doing this saved us a lot of money. Once we got the higher interest payment out of the way we followed the snowball method. It’s up to you and whatever works best. I understand most people have car payments with 20-30% interest and so it’s hard to not want to get that out of the way. But I understand the snowball method because it gives you small motivating wins.
Step 3: Automate Savings and Debt Payments
Automation is your secret weapon for consistency. Set up automatic transfers to your savings account and automatic debt payments each month. This removes the temptation to spend extra money and ensures you’re making progress without relying on willpower.
- Automate savings right after payday.
- Schedule debt payments before the due date to avoid late fees.
- Use separate accounts so your savings aren’t too easy to dip into.
Step 4: Cut Expenses Without Feeling Deprived
You don’t need to live on rice and beans to save money while paying off debt. However, make changes where necessary. We did not sacrifice our food budget much. It’s important for us to eat healthy now so we don’t need to go to the doctor. But you can definitely cut expenses. Small, intentional changes can free up cash without drastically lowering your quality of life.
Here are smart expense-cutting strategies:
- Switch to a cheaper phone plan – Consider prepaid or budget carriers.
- Cook more at home – Meal prepping saves money and time. A lot.
- Cancel unused subscriptions – Review monthly charges and cut what you don’t use.
- Use cashback apps – Earn money back on everyday purchases.
- Buy generic brands – The quality is often the same as name brands.
Step 5: Increase Your Income
Sometimes, cutting expenses isn’t enough — you need to earn more to create breathing room. Fortunately, there are countless ways to make extra money.
Ideas to boost your income:
- Freelance skills like writing, design, or programming.
- Part-time work in retail or hospitality.
- Online tutoring or teaching.
- Renting out a spare room on Airbnb.
- Selling handmade crafts or products online. eBay or Etsy.
Even an extra $200–$500 per month can make a huge difference in both debt repayment and savings. - Sell books from the thrift stores. This one is my favorite.
Step 6: Use Found Money Wisely
When you receive unexpected cash — such as tax refunds, work bonuses, or birthday money — split it between savings and debt.
A simple rule:
- 75% toward debt
- 25% toward savings
This keeps you moving forward on both goals without feeling guilty about not applying it all in one place.
Step 7: Refinance Your Debt
If you have high-interest credit card balances or multiple loans, refinancing or consolidating can lower your interest rate and free up more money. I’m not talking about companies that set up one large payment and you pay them and they pay your debt. These companies are mostly in it for themselves and not so much helping the customer. But your student loans you may be able to consolidate or refinance into one loan.
Options to consider:
- Balance transfer credit cards with 0% introductory APR (be mindful of fees and deadlines).
- Debt consolidation loans from reputable lenders (credit unions or local banks)
- Refinancing student loans for a lower rate (only if you’re comfortable giving up certain protections).
Step 8: Track Your Progress
One of the most powerful motivators is seeing your success in real time. Use apps, spreadsheets, or simple pen-and-paper tracking to monitor:
- Total debt balance
- Savings account balance
- Monthly net worth
Celebrating milestones — even small ones — keeps your momentum going.
Step 9: Protect Your Savings
Once you’ve built a small emergency fund, avoid dipping into it unless it’s a true emergency (unexpected car repair, urgent medical bill, etc.). For predictable expenses like annual insurance premiums or holiday gifts, create sinking funds — small, separate savings accounts for specific purposes.
Step 10: Adopt a Long-Term Money Mindset
Paying off debt and saving money is more than just numbers — it’s about building habits and a mindset that last a lifetime.
- Focus on needs over wants.
- Avoid lifestyle inflation as your income grows.
- Remember that small daily choices compound over time.
Sample Monthly Budget for Saving and Debt Repayment
Here’s an example of how you can structure your budget to achieve both goals:
| Category | Percentage of Income | Example on $3,000/month |
|---|---|---|
| Housing & Utilities | 35% or lower | $1,050 |
| Food & Groceries | 15% | $450 |
| Transportation | 10% | $300 |
| Debt Repayment | 20% | $600 |
| Savings & Emergency | 10% | $300 |
| Insurance | 5% | $150 |
| Entertainment | 5% | $150 |
| This structure keeps your savings growing while still aggressively paying down debt. |
This is just a sample. Obviously if you make more then pay more toward your debt and put a little more in your savings.
It’s true we could be debt free a few months sooner, but we want to build our emergency fund before doing so. So this method works for us.
Saving Money While Paying Off Debt Is A Strategy
Saving money while paying off debt is a balancing act, but with the right strategies, it’s entirely possible. Start with a small emergency fund, choose a repayment plan that fits your style, automate your finances, cut unnecessary expenses, and increase your income where possible. Most importantly, stay consistent — even small, steady progress will lead you to financial freedom. Dave Ramsey’s method does work. But if you need a more emergency cushion, then do what’s best for you and family.
Your future self will thank you for starting today.
Photo by olia danilevich
