How to Save While Paying Off Debt

Explore ways to find balance between paying off debt and saving for the unexpected


With everything life can throw your way—medical bills, car repairs, job loss and more—there’s often no shortage of financial emergencies to deal with. So it may make sense to have an emergency fund to help tackle unexpected expenses.

But putting aside a few months’ pay isn’t easy—especially if you’re also working to pay back loans and credit card debt. Read on for ways to help you do both at the same time.

How to Save Money and Pay Off Debt

When it comes to finances, everybody’s situation is different. But for many people, it may be helpful to ask: Is it better to save money or pay off debt?

Here are some things to keep in mind if that’s a question for you.

Get Clear on Your Goals

You may be saving for an emergency fund, building your savings to reach a goal or working to pay off debt. If so, you might feel like you already have a financial road map in place. 

But it’s still important to examine your goals and be really clear on them—that’s according to Carmen Sullo, a Capital One Money & Life Mentor.

Carmen spends most of her workdays at Capital One Cafés, helping people understand their relationship with money. Her philosophy on saving: If you can get your savings to a place where you feel safe and secure, it’s easier to focus on living life to the fullest. 

While you’re saving, you may also want to think about debt—specifically, how much it could cost you in the long run with interest, penalties and other types of charges. 

Take credit cards, for example. Making more than your minimum payment is one way to stay on top of your debt. It can also help keep your account in good standing and help you avoid a decrease in your credit score.

Making more than your minimum payment can also reduce the amount of interest you pay. But even if you can’t pay your full statement balance, paying the minimum amount required can help you avoid penalties or additional fees.

Take a Look at What You Owe

It’s important to be clear about what you owe. Part of that is making sure you can cover your recurring bills before taking on extra expenses.

After all, when you miss payments, you can be hit with banking charges and late fees—and those can add up over time. Missing payments may also have a negative impact on your credit score.

Plus, if you’re being charged fees, that’s money that could be better used to pay down your debt or boost your emergency fund.

Make a Budget

When it’s time to make a budget, it may help to use a worksheet like this one from the Consumer Financial Protection Bureau (CFPB) as a guide. 

It may also help to follow these general steps for formulating a budget:

  1. Add up your monthly income. This includes your salary at your job—plus other sources of income like bonuses, tax refunds or income from side work.
  2. Add up your monthly expenses. These can include expenses in the major “buckets”—housing, food and transportation. For expenses that aren’t always the same—food and utilities, for example—you could use an average from previous months.
  3. Subtract your expenses from your income. This amount will be the starting place for your budget. Anything that’s left over is what you have to work with when you’re paying down debt and building up savings.

As the CFPB explains about budgeting, “Maybe your income is more than your expenses. You have money left to save or spend. Maybe your expenses are more than your income. Look at your budget to find expenses to cut.”

Hint: Don’t necessarily assume you’ll have the same amount left over each month. If you’re planning a vacation or the holidays are coming up, for example, there could be additional expenses. 

Build a Buffer in Your Checking Account

If you’re able, you might consider building a buffer in your checking account. 

One benefit of having a little extra money in the account—and trying not to touch it—is that you might avoid overdrawing. After all, overdraft charges are avoidable—and they can really add up. 

A buffer could also give you peace of mind. With one in place, you can focus on making real progress toward debt or savings goals.

Grow Your Savings

Once you have a buffer in your checking account—and feel like your debt is more manageable—you might consider using any extra money to build savings for life and emergencies.

As you build savings and eliminate debt, keep track of your progress. That could help create momentum when it comes to making good choices like saving more or spending less. 

Here are some basics for starting and growing your savings:

  • Shop around for your savings account. Many savings accounts offer a small amount of interest as a return on your deposit. But rates can vary from one account to another. If you find an account with better rates, that extra interest can add up over time—especially as your savings grow.
  • Put any extra income into your savings. Extra income can be things like cash gifts, tax refunds, work bonuses or money from a side job. The extra money can really boost your progress.
  • Avoid the temptation to splurge. You may want to resist the appeal of things you want—and instead, spend on things you need. That way, you can put even more toward your savings.

Start Putting What You’ve Learned Into Action

If you’re trying to pay down debt and grow savings at the same time, it may be helpful to review what you’ve learned in this article: 

You might want to start with taking a look at your goals. 

From there, you might take a look at what you owe, put together a budget and reflect regularly on your progress—all things that could help keep you focused and feeling positive.

And for more support, consider making an appointment with a Money & Life Mentor in your area.


Learn more about Capital One’s response to COVID-19 and resources available to customers. For information about COVID-19, head over to the Centers for Disease Control and Prevention

Government and private relief efforts vary by location and may have changed since this article was published. Consult a financial adviser or the relevant government agencies and private lenders for the most current information.

We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.

The Money & Life Program and Money & Life Mentors are not financial advisors, or accountants, or tax specialists. Materials have been prepared by Capital One for instructional and educational purposes only. The information provided is not intended to encourage any lifestyle or changes without careful consideration and consultation with a qualified professional. Not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any Capital One product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional.

Take Control of Your Credit

Build credit with responsible use and a Capital One Platinum Secured card. There’s no annual fee!

Learn More

Related Content

Money Management

Ways to Pay Off Debt