The Easy Way to Pay Down Debt AND Save for The Future

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You know that moment in the week when it’s time to pay bills.

You open your emails to see how much you owe your credit card company and then your usual payment to Navient/Sallie Mae.

And somewhere in your mind you begin to wonder how are you going to get ahead and start using that money to reach you big, #adulting goals like buying a house.

Then that recurring day dream starts… the one about having an enough to never be stressed about paying bills or living a baller’s cushy life….

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Wake up!


You keep hearing me and other people in your life say “you should save more”.

And of course, you want to…. BUT… you also have credit cards bills and the ever present student loans.

Not to worry. We are going to make a plan to get there by helping you balance between saving or paying down those debts.

it’s definitely possible to do them both (pay off the past and save/build for the future).


Step 1. Determine how much money you have to allocate to savings or paying debt.

I’m going to call this the “savings fund” because I’m super creative…

This is the amount you have left over, AFTER you pay your must have expenses.


For example,

if your after-tax check is $ 2,500 per month and your must have expenses is $1500.

That technically leaves you with $1000 for the savings fund, but of course, you need to enjoy the fruits of your working hours also. Assuming you put aside $500 to ball on a budget, you have a grand total of $500 to pay debt or save.

It’s important to note that paying down your debt is a form of saving. Each payment you make reduces how much you owe creditors, which in turn increases your net worth.

OK. Now we need to figure out what to do with the $500.

This is your monthly savings fund.


Step 2. Check the interest rate on your credit card and your student loan debt.

Most likely the credit card interest rate is a double digit number, in which case you want to focus on paying that down as fast as possible. Unfortunately, it’s hard to find investments that can consistently bring you double digit returns, so pay off that Chase/Discover/VISA card ASAP so you can put that money to good use for the future.

Your student loan debt on the other hand will typically have a lower, single digit interest rate. You can take advantage of that low rate by investing any ‘savings fund’ money into an investment where you can get a higher return than the student loan interest rate.


Step 3. List out the amount of debt you owe monthly and the amount of the financial goal.

Once you know how much you owe, you can determine how much is available to put toward a bigger goal. Ideally you will have some leftover to be able to put toward a future financial goal (like a $10k home down payment or $2000 annual vacation budget).

Savings Fund: $500

Credit Cards: $90

Student Loan: $250

Remainder: $160


Goal is $10,000 down payment.

This will take 62.5 months or over 5 years if you only put $160 towards this financial goal.

Obviously 5 years feels like forever away.

You can accelerate this process by either spending less and aggressively pay down your debt.

The higher your overall savings fund number, the more you will have left over after you pay your debt.


Step 4. Decide what will motivate you to move forward consistently.

This is the psychological part of money management.

I can tell you all the ‘right’ things to do when it comes to maximizing and leveraging your finances, but at the end of the day you have your own unique habits and patterns when it comes to money.

As you start to take control of your personal finances, know that you can split your savings fund between both debt pay down and savings to address your current obligations and your future goals.

Progress is happening. Slow and steady wins the race.

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