Should I save or pay off debt?

Should I save or pay off debt?

 There really is no right or wrong answer to this question.

It all comes down to your financial situation your goals and what you’re trying to achieve. For some they would argue that you shouldn’t save anything and just focus all your efforts on debt repayment. Others argue that you should save for everything first then pay off debt. Neither is right or wrong, it just all comes down to what YOU are aiming towards.

During my debt free journey there were many times I was faced with this dilemma. I’m going to go into these a bit so you can read about my experience and thought process and make decisions for yourself.

In 2016 I started my debt free journey; I knew it wasn’t going to be easy by any means. I also had gone through some pretty stressful times with closing down the business, my boyfriend moving out, starting my first ever full-time job and getting 90 days’ notice to move out of my house. Needless to say, my mental health was a bit low at this point. And because my interest was so high on my debt, I felt like I was on a hamster wheel.

I made a decision in January 2017 that I needed something to look forward to. At the time I was in a different role in my company and debt freedom still looked about 8-10 years away. Our minds work in funny ways and while I knew that debt freedom was the ultimate goal, it felt like it was an unachievable amount of time away. I needed something more short term to reward myself with.

Soooooo, I decided to book a trip to Europe. Not a huge OE but a short 3-week trip to London, Spain, Greece and Dubai. But I also didn’t want to get into MORE debt so I made a decision to save up and cash flow this trip. So yes, for a while I was paying off the debt AS WELL as saving for my trip.

How did I manage this?

I made sure the minimum repayments were being made on every single one of my debts (I had 10 at this point) – plus an extra $10 a month. Then anything extra I was earning or saving I put towards my holiday fund. It only took me about 6 months to save the money I needed for my trip.

I actually paid off one of my debts while I was also saving for my holiday but I rolled this payment onto the next debt instead of savings. The reason for this was to keep sticking to my debt payment plan WHILE I was saving.

I also followed this method for a trip to Sydney in 2018, trip to Thailand in 2018 and a trip to Melbourne in early 2019. After this last trip I did the figures and I knew that if I knuckled down, I would be able to become debt free by the end of 2019. I put all other savings on hold and purely focused on my debt at this point. Proof that the choices really do differ based on the goal at the time.

There are other times I stopped debt repayments to save – and most of these were to make sure I didn’t get back into debt. This included my Oh Sh!t fund, my Christmas fund and buying the car I have now.

I am well aware that financially I could have been debt free earlier if I chose not to go overseas. I could have saved a bit more in interest if I put that money towards debt as well. But the reality of the situation is that for my mental health and frame of mind I made these decisions. Do I regret them? Absolutely not. Would I do things differently if I had to go back? Nope. Even now, I am choosing to save for my roof repairs rather than wait and top up the mortgage.

There really is no one size fits all to finance – any progress towards your debt free journey is good progress. My advice on this is make sure you are making decisions that will help relieve stress, and you can always change the plan if it isn’t working for you.