Flashback: Pay down debt before you save a lot

K’s Financial Progress hosted the 4th Carnival of Debt Reduction.  The top article on that carnival was written by Jim over at Blueprint for Financial Prosperity:

Don’t save, pay off debt!

His argument is a good one.  If you have a lot of credit card debt or loans to pay off, pay those off before socking away a lot of money in a savings account.  The interest you’re likely to earn on a savings account is a lot less than the interest you’ll pay on most credit card balances (unless it’s a 0% balance transfer).  Earning 4% or even 5% in a high-yield savings account is counter-productive if it’s more than you need for an emergency fund and if you have balances that are costing you 15% or 20% or more.  Once the debt is gone, the leak in your checkbook will dry up and then you can go to town and save like gangbusters.

1 thought on “Flashback: Pay down debt before you save a lot”

Leave a Comment