Saving for Emergencies While Paying Off Debt

Explore ways to manage debt while making sure you’re prepared for the unexpected


Medical bills, job loss, car repairs or whatever else life throws your way—there’s no shortage of potential financial emergencies in life. So it makes sense to have an emergency fund to help tackle unexpected expenses.

But putting aside a few months’ pay isn’t always the easiest thing to do—especially if you’re also working to pay back long-term loans or credit card debt.

Everyone's situation is different, but here are some things to keep in mind if you’re wondering how to save for emergencies while paying off debt.

First, Get Clear on Your Goals

If you’re saving for an emergency fund or working to pay off debt, your financial goals may seem obvious. But examining your goals and intentions is still an important step, according to Carmen Sullo, a Capital One® Money Coach. 

Carmen spends most of her work days at Capital One Cafés, helping people understand their relationship with money. She says having an emergency fund is all about surviving vs. thriving. 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. 

Trying to manage debt at the same time can complicate things, though.

“Take time to declare your savings goals,” Carmen advises. “This will help keep you honest with yourself about why you need them, if you need them, and just how important they are to you.”

Growing your emergency fund is a worthy goal. But it’s important to consider how much high-interest debt could cost you in the long run. 

That’s because the interest on loans and debt can add up over time and keep you from paying back the principal (the original amount you borrowed). To make faster progress on your debt, paying more than the minimum payment is key.

Take a Look at What You Owe

Be clear about what you owe—and make sure you can cover any recurring bills. Overlooking bills or missing payments could result in overdraft charges or late fees. Those kinds of fees are avoidable—and they can add up over time. 

Plus, if you’re putting money toward fees, you’re missing chances to pay down your debt or boost your emergency fund.

Make a Budget

Budgets don’t have to be complex or inflexible. Tracking your spending and income lets you know how much money you have to work with.

First, add up all of your monthly expenses. Bank or credit card statements can be very helpful when tracking where your money goes. Be sure to include the payments on any outstanding debt, such as credit cards or car loans. And use an average from previous months to factor in expenses like food and utilities that aren’t always the same.

Once you have a total, subtract your monthly expenses from your monthly income. The result gives you a rough estimate of what you have to work with. Don’t assume you’ll have the same amount left over each month. If you’re planning a vacation or the holidays are coming up, there could be additional expenses. 

Try thinking of your budget as more of a guideline than a rule. It’s OK if you don’t stick to it all the time.

Build a Buffer

If you’re able, you might consider building a buffer into your checking account before going after other goals. 

Having a little extra money in your account that you don’t touch might help you avoid overdrawing. And it could also provide peace of mind—so you can focus on making real progress toward debt or savings goals.

Grow Your Savings

Once you have a buffer—and your debt is in a healthy place—leftover money could be used to build your emergency savings. As you save and eliminate debt, keep track of your progress. That awareness and momentum can lead to better choices like saving more or spending less. 

You can also look for other opportunities to get the most out of your money:

  • Put away any extra income. Cash gifts, tax refunds, work bonuses or money from a side hustle can really boost your progress. If you can, avoid the temptation to splurge on new purchases, and put extra money toward savings instead.
  • 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.

Remember, if you’re trying to pay down debt and grow emergency savings at the same time, it may be helpful to take a look at your goals. From there, a clear plan, a budget and regular reflection on your progress can help keep you focused and feeling positive.

For more support, consider making an appointment with a Money Coach, like Carmen, in your area.


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

Money coaches are not financial advisors, 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.

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