Friday, March 4, 2011

Save money or pay off bills?

Another question I get here at Frugal Living is "Should I save money, or pay off bills first?"

If you ask that question in a room with ten frugal living and personal finance experts, you'll get fifteen answers. I'll throw mine into the ring:

It's never a good idea to put all of your money into one pot. If you're in debt, you need to get out as soon as possible, but if you have no savings, you need to get some started immediately.

Why not get the best of both? After your basic bills are paid, divide whatever money you have and put part of it toward paying down bills (pay extra) and put the rest into a savings account. You will eventually be in a position to handle any money emergency without worry. 

The argument for starting a savings along with debt down payment goes like this: If you don't spend all your money paying down debt and something happens (your car needs repairs, you have unexpected medical expenses, etc), you can cover them with cash and not go deeper in debt.

All of this supposes that nothing is going to happen for awhile. If it does, be a little more frugal (or a lot more frugal if you need to) and pay as much in cash as you can.


  1. I agree! You CAN both save and pay down debt! I am doing it right now!! It does mean living BELOW your means but I'm OK with that! I would rather sacrifice now then have a major problem come up and not be able to handle it because I was a spendthrift! Especially now when the cost of EVERYTHING is going UP UP UP and jobs are still not being added as fast as people are losing them! I know the news keeps trying to drum in our heads that the recession is over but it is NOT for Main Street!
    So how do you pay down debt and save? Well there are drastic cuts that have to be made (no I don't abide by the governments spend to get out of debt theory!) You have to CUT! SO that means we are not able to go out to eat or pay for ANY entertainment expenses. Instead we have to do things for free like ride bikes go fishing(except for the license and that covers a year) hiking library. We CUT the food bill and live on cheap and easy meals so that we are not overspending in that department and I have had to give up cooking in my gas oven because of the price of gas. What USED to cost 32.00 a month for cooking in the oven has now gone to about 80.00 a month and that is using the oven conservatively. I did receive a roaster oven for Christmas which I am using and I have two crock pots. I own chickens and make mayonnaise from scratch as well make all of my cleaning products and laundry detergent. We drive only where we have to go so no road trips for awhile :( ! Also we are reusing all our water that we can and I do grow a small garden as water prices are going to rise here within the next month or two by 7%! So we don't want to spend a lot on that! Since I live in Phoenix we plant desert landscape but we had several freezes here this winter and my plants look terrible but they do come back so I will have to give lots of TLC to them as I don't want to spend the money on replanting! You have to do what you can for YOUR situation and cut whatever you have to from the budget. Talk to your family to come up with ideas as to saving even if it means getting rid of or cutting way back on cell phones and other electronic gadgets. My computer uses dial-up but I only pay 10.00 a month so for me it is well worth it. I have a pre pay cell phone and it is only used for emergencies. Look for ways you can cut and divide the money between savings and debt reduction. Even if it is a small amount a month those small amounts add up to big savings over time!!! My children grew up with the art of self entertainment so they are not relying on other people to entertain them. They read watch movies and have friends over. Also we did not teach our children that they have to wear brand name clothing. I know where I work as a Teacher Assistant I see kids as young as 7 wearing expensive brand name clothing. Why? I don't pay anything over $20.00 for a pair of shoes and even that is too expensive for me. I see kids with 60.00 shoes on! That 60.00 can be split and put into savings and debt reduction! The same with brand name shirts and pants why spend that kind of money? Instead buy what is on sale. Clearance is my best friend at any store and this is the rack I fill my son's closet with. Also we do lots of hand me downs as well. It does work and I have been able to shuffle savings away while working on debt reduction including paying for my son's braces out of pocket. Sometimes all is takes it prioritizing our lives and our wants and needs!

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