Paying Down Debt IS Saving
If you’re planning to save by paying down debt, you’re in good company: getting out of debt is the #3 savings goal people select when taking the America Saves Pledge. That makes sense because debts can keep you from building wealth.
The good news is that with planning and support almost anyone can reduce their debts and start to accumulate wealth through saving. But one quick thing you’ll need to understand, that many people often don’t consider is this: paying down your debt IS saving.
In fact, that idea is a driving belief at America Saves, because when you reduce your debt you:
- Save money on interest and fees,
- Build and/or maintain your credit score, and
- Build your net worth by eliminating your debt.
Debt can become a cycle. Think about it.
Can you only afford to make minimum payments on your credit cards?
Do you borrow money to pay off old debts?
Have you used a home equity loan to refinance credit card debts, then add new revolving balances on your cards?
By successfully paying down (and eventually paying off) these debts, you have more cash flow available, making the use of credit less of a necessity.
Prioritizing Your Debts During A Financial Crisis
One other important note, “If you’re currently living off your savings, you should not be prioritizing paying down debt,” Robin Saks Frankel, Forbes Advisor suggests. Instead, your money should be going to your necessary expenses. Living off savings is not the time to aggressively reduce your debt.
If you are currently earning an income, a huge part of saving by paying down debt is setting your own priorities: is it most important for you to save now, in the present? Or for your future?
America Saves has specific resources, depending on your answer. If you want to save money now on interest and fees, then you’ll pay down debt by prioritizing certain debts. If you want to save money by building your credit score, then you might use a slightly different analysis to prioritize which debts to tackle first.
Many of us have been overwhelmed by debt before, remember to start small and think big! And that by paying down your debt, you ARE saving.
Want support, resources, tools, and tips on how to reduce your debt? Take the America Save Pledge and choose “Reducing Debt” as your goal.