This is a question I get A LOT. People hear my story and always ask me how we paid off $36k of debt in one year while paying for our wedding, cash flowing school tuition, and saving for a house. I am not going to lie, finding the balance between your money goals takes time and some trial/error but it CAN be done.

I wanted to share some lessons I have learned from my own personal journey and tips I share with my clients.

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Let’s start with why I believe it is important to save and pay debt at the same time.

First, emergencies happen to EVERYONE. In the past 2 months we spent over $6k on my dog that passed away and thankfully we had the money in savings to cover the expenses. Did we have to pull from other sinking funds? Yes but we had the money and didn’t have to make any decisions for her based on the financial impact. We were able to make a decision based on what was best for her.

I am a firm believer in saving, especially for emergencies, while paying debt. Even if that means you need to just pay the debt minimums until you are able to have a comfortable emergency fund.

Write Down Your Debt & Savings Goals

Before you can decide how much to through to debt or savings, you need to fully understand your current situation and your 1-3 year goals.

How much debt do you have? What type of debt? What are the interest rates? What are the minimum payments?

What are your savings goals? Are you trying to buy a house in the next 1-3 years? Do you have a family trip you need to save for? Will you have home/car repairs in the near future?

Once you have this all written down, you can start planning how to allocate any extra money you have.

Balance Emotions and Math

No one can tell you exactly how much to save each month or put to debt. I mean someone can help you review options and decide what is best for you, but you need to decide what you are most comfortable with.

What causes you more anxiety? What keeps you up at night?

Having debt or lack of savings? Are you worried about a specific savings goal? Does a certain debt give you anxiety because ofi ts balance or interest rate?

This will help guide how you allocate your money. Timeframes will also help you make a decision. If you are trying to buy a house in 2 years and you know you will need $20k for a down payment, you need to decide when you have to start saving even if you have debt.

You can either start saving now and split $20,000 by 24 months and save around $834/mo or you can save more each month for a certain amount of time.

Debt interest rate is another factor to consider. If you have a credit card with 24% interest rate, you might want to pay that off first and roll that minimum payment to another debt once it is paid off. This way you are paying more to debt each month without actually changing anything within your budget (just shifting which debt it is going to once the credit card is paid off).

If you have no emergency fund or a very low emergency fund, maybe you build that up to $2,000 and once you are there you shift more of your extra money to debt instead of savings.

What is right for you might not be right for someone else but these are all things to consider when balancing debt and savings. You have to balance math and emotions because at the end of the day you need to be confident in your decision.

Remember, you can change your mind. I change my mind every single month.

Make Changes as Needed

Depending on our goals, each month might look different for us.

After filling out my budget per paycheck worksheet, I know how much extra I will be able to throw to debt or savings for that pay period.

Let’s say for example I have $1,000 to allocate to savings and debt for July after paying my bills.

I recently had to use part of my emergency fund and it is only at $1,000 so I want to get it to $2,000 to feel more comfortable. I also need to continue saving for a down payment, add to my pets sinking fund, and would like to make an extra student loan payment.

I decide for July I will allocate the $1,000 accordingly:

$400 to emergency fund
$400 to house down payment fund
$50 to pets sinking fund
$150 to student loans

Now I am planning my September budget and my emergency fund is back at $2,000 so I do not need to allocate any funds to my emergency fund. I have the same $1,000 to allocate so I do the following:

$500 to house down payment fund
$100 to pets sinking fund
$400 to student loans

As you can see, once my emergency fund hit an amount I was comfortable with, I stopped contributing so I could put more to debt instead. These are just 2 examples of how you can allocate your extra money after bills.

If you need help or still feel overwhelmed, reach out! This is what I help clients with every single week. We can talk about your situation and how I can help. You can learn more here.

Give Every Dollar a Purpose

The key to paying off debt and saving money at the same time is giving every single dollar a purpose each pay period (or month if you only do a monthly budget). Treat your savings and debt goals as mandatory “expenses”. I make extra debt payments or transfers to savings each pay period instead of waiting until the end of the month so that I do not end up spending the money on something else (aka food for me).

Allocating every single dollar each pay period makes it much easier to save and pay off debt at the same time. This is why I believe in budgeting per paycheck vs. a monthly budget. My clients and I have been able to actually stick to our budget by giving every dollar a purpose each pay period vs. each month. It allows you to make adjustments throughout the month if you are over/under in a specific category and it reduces the risk of impulse spending because you already allocating the extra money to savings or debt instead of waiting until the end of the month.

Year Overview Tracker

One tool that really helps me and my clients plan out our goals and what we have to save for is a year overview tracker (see example below). You can easily create this in your google calendar, google sheets, excel, or even paper. This helps me visually see how much time I have to save for something and plan out how much money I need to allocate each month. This makes it SO easy for me to budget and transfer to my budget per paycheck worksheet.

Do you save and pay off debt? What works for you?