Is it better to eliminate debt entirely before saving?

Seeking Advice Forum
1

Hey guys, Just to give you some background, I have €9,000 saved and I make about €3,200-€4,000 a month. My budget looks like this: my weekly budget is €240, and I aim to save at least €640 each month (any extra money above €3,200 goes into savings). My total monthly bills are around €1,600, and I follow the 50/30/20 rule based on my minimum income. Right now, I have about €10,800 in auto debt and that’s pretty much it. Should I start putting the €640 I usually save towards my car payment instead to pay it off faster, since I already have an emergency fund set up? Thanks!

2

It really depends on your situation. If the interest rate on your car loan is high, paying it off faster could save you money in the long run.

3

Peyton said:
It really depends on your situation. If the interest rate on your car loan is high, paying it off faster could save you money in the long run.

That’s a good point! The rate is around 5%, so I’ll think about that.

4

I’d say keep saving while making minimum payments. Having a savings cushion is important in case of emergencies.

5

Rian said:
I’d say keep saving while making minimum payments. Having a savings cushion is important in case of emergencies.

Yeah, I get that. I have my emergency fund, but I want to be smart about this.

6

If you’re comfortable with your emergency fund, you could split that €640 between savings and the car payment. This way, you’re still saving while reducing your debt.

7

Tilden said:
If you’re comfortable with your emergency fund, you could split that €640 between savings and the car payment. This way, you’re still saving while reducing your debt.

That sounds like a balanced approach. I might try that!

8

Also consider how you feel about debt. Some people prefer to be debt-free, while others are okay with manageable debt.

9

Leith said:
Also consider how you feel about debt. Some people prefer to be debt-free, while others are okay with manageable debt.

I think I’d feel better being debt-free, honestly.

10

Just keep an eye on your budget. If you can pay off the debt faster without sacrificing your savings goals, that might be the way to go.

11

Wren said:
Just keep an eye on your budget. If you can pay off the debt faster without sacrificing your savings goals, that might be the way to go.

Thanks for the advice! I’ll definitely weigh my options.