Should You Pay Off Debt or Save?
This is a question a lot of people wrestle with: “Do I throw extra money at my debt, or should I start saving instead?” To be honest with you, there isn’t one clear cut answer that works for everybody.
The fact is your situation, your mental health and your long-term financial goals all matter. At TFNB Your Bank for Life, we’ve been helping our Waco neighbors sort through decisions like this for over a century. And here’s the good news: you don’t have to figure it out by yourself.
Our financial experts wrote this article to help you figure out whether saving, tackling debt or a combination of both might be the best move for you.
Why Knocking Out Debt Can Be a Game Changer
High-interest debt is tough. Credit card debt left untackled can snowball over time quickly. Rates can climb over 20%, and the balance just grows and grows. However, paying off a credit card balance is almost like giving yourself a guaranteed return on your money — something no savings account can match.
Think about it this way: let’s say you’re carrying a $3000 balance at 20% interest. That’s about $600 a year in interest charges alone. Pay it off, and you just “earned” that $600 back.
And once that debt is gone? The relief is priceless. Freeing yourself from a burdensome loan or credit card balance gives you more control over your monthly cash flow and opens the door to other goals, like building up your savings. If debt is causing anxiety or holding you back, focusing on repayment is often the smartest move.
Why You Still Need a Safety Net
On the flip side, skipping savings altogether can back you into a corner. Life doesn’t wait until debt is gone to throw surprises at you. Cars break down. Home repairs spring up. Medical emergencies happen. If you don’t have at least a little set aside, you’ll probably reach for a credit card — and boom, the cycle starts again. Experts say a good target is three to six months of living expenses in an accessible savings account. Even starting with a small emergency fund of $500 to $1,000 can make a difference.
A Balanced Way Forward
For most people, the best approach is a mix. Here’s a simple plan:
- Step 1: Save $500–$1,000 for emergencies. This gives you a small cushion so unexpected expenses don’t send you straight back into debt.
- Step 2: Tackle high interest debt. Pick the method that feels doable—the “snowball” (paying off the smallest balance first) or the “avalanche” (starting with the highest interest). The important thing is to stay consistent. We broke these strategies down in this blog post if you’d like a closer look.
- Step 3: Build savings up to 3–6 months. Once high-interest debt is under control, start building a bigger emergency fund so you’re covered for life’s bigger surprises.
- Step 4: Aim for bigger goals. Once the basics are covered, set your sights on future goals: owning a home, investing, or growing your retirement.
It’s not complicated, but having a plan makes all the difference.
Let’s Make a Plan That Works for You
Money choices can feel heavy but you don’t need to carry them alone. That’s where we come in. At TFNB, we’re not just any bank — we’re your neighbors too. We live here, we work here, and we care about helping Waco families take the next step forward.
Whether it’s a lower interest loan that helps you knock down debt faster or a savings account that grows with you, we’ll walk you through your options.
Stop by one of our branches here in Waco and talk with one of our bankers face-to-face. We’ll help you figure out a plan that feels right for you.
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