June 19, 2021 • 11 mins
Do you want to save or pay off debt first? It's a tough question and one that we all need to answer. I go over the pros and cons of both options in this episode, so you can make the best decision for your personal situation!
Grab your FREE money tracker at
http://trackingmycoins.com
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Unknown (00:03):
Hello, and welcome to the savvy Brown Girl podcast, a
podcast about personal financeand entrepreneurship for savvy
women. This is Episode One, andtoday we're going to be talking
about saving money versus payingoff debt. Again, I am your host,
Wendy Coop, a financial coach,and pastoral counselor. And I
(00:26):
thank you for joining me today.
Before we go any further, makesure you subscribe to the
podcast to make sure you'renotified when all the new fire
episodes drop. So saving moneyversus paying off debt. That is
a big, big question. Because youmay be carrying a lot of debt,
(00:46):
you may be carrying a little bitof debt, but your savings just
might not be there. And let'sface it, after the year and a
half that we've had, I wouldn'tblame you if your savings has
been depleted a little bit. Justfor context. I'm recording this
episode on June 10, of 2021. SoJune 19 2021, I'm recording
this. And we are still in apandemic, things are starting to
(01:11):
open up and things like that.
But there are still a lot ofpeople without work, though
that's getting better. There area lot of places that are hiring
people. That's good. But overthe last year, year and a half,
a lot of people have had todeplete their savings because of
(01:32):
unexpected caregiving kids beingat home for school, job losses
and things like that. And in themeantime, your debt may have
risen, or it may haveunfortunately just stayed the
same. Either way, now you'refacing the question with your
budget, do you save more money?
Or do you start paying off thatdebt? Well, I have some
(01:55):
suggestions for you. And I justwant to preface that by saying
that every situation isdifferent. So there is no one
right answer here. And I don'tthink you can go wrong except to
not do anything. So as long asyou do one of the two, I think
you're going to be okay. And ofcourse, we are still in a
(02:17):
pandemic. So take it easy onyourself. If you don't get to
$5,000 in savings after a month,it just may not happen that
quickly. And that's okay. So, tostart off, in order to determine
whether you're going to savemoney, or pay off debt, you need
(02:37):
to know how much you have insavings, how much you spend each
month, and how much debt youhave. And by the way, if you
don't know where your money'sgoing, grab your free money
tracker and see what you spentover the next month. And you can
grab that at tracking mycoins.com. Now, a lot of people
(02:58):
in the savings versus pay payoff debt debate. Talk about this
in terms of interest rates, theysay well, you're dead likely has
a higher interest rate, doubledigits, hello credit cards, then
savings, which is usually anabysmal, tiny, tiny rate of
(03:21):
interest that you're getting forletting your money sit in an
account. But in the situationthat we're in in 2021, I'm
telling you, interest ratesdon't matter right now. They
really don't. Because it's moreimportant for you to have money
to pay your bills and to keepthe lights on and food in your
(03:42):
tummy than it is to pay off theSIR MasterCard. Okay, let's just
set some priorities there rightoff the bat. The other thing is,
we also have to consider whetheror not your income is regular,
or semi regular, or whether it'spretty unpredictable. Those of
(04:03):
us who work for ourselves can inthe beginning have pretty
unpredictable income. And thatrequires a special type of
budgeting that we'll get into inanother episode. But I will say
if your income is irregular orunpredictable, then I think you
should save first save the moneyfirst so that you have money to
(04:27):
pay your bills on in the leanermonths. So if you're in a feast
or famine cycle, so to speak,save the money during the
feasting so that you have moneyduring the famine.
Also, I'm going to recommendthat if you are current on your
debt payments and your budget isintact, that you go ahead and
(04:51):
save first. You don't have torush to pay off your debt. It's
really not an emergency to payoff your debt. So you can Go
ahead and save first in thatsituation. And if you're going
to save first aim for at leastthree months of expenses, not
income expenses. The differencesis that if you lose your job, or
(05:13):
are otherwise unable to work,you are not going to have the
same level of expenses as youwould normally live in your day
to day life. So if you arefacing a job loss situation or a
period of time where you can'twork, because you're sick, it's
unlikely that you're going toneed to keep all six streaming
services, you know, up to date,like you don't have to have
(05:37):
Netflix and Disney plus, andamazon prime video and all the
things right like just stickwith one. So you want the
expenses, the necessary regularexpenses to keep the lights on
to keep food on the table, andto keep your sanity. But that
(05:57):
may mean dropping your gymmembership, okay, some of us
still have those. If, however,you have steady income, and all
your household items are takencare of pretty easily go ahead
and start paying off that debt.
And we're going to pay off thedebt from the smallest balance
to the largest balance, we'regoing to pay it off in that
(06:19):
order. That's called thesnowball method. Many people use
it, I'm sure you've heard of it.
But that's how we're going topay off the debt in order so
that you have your small wins.
And you can snowball the paymentfrom the small debt into the
payment of the next largestdebt. So really quickly, what
that looks like is say you havesomething that costs you $42 a
(06:44):
month, and then you have anotherdebt that cost you $100 a month.
But when you pay off the $42 amonth debt, you're going to take
that $42 and then you're goingto apply it to the next largest
debt, in our case $100. So yournext debt payment will be $142.
On on that next debt. And itjust keeps going like that like
(07:10):
in a snowball. So that you getout of debt faster, because over
time, the payments you'reapplying are larger and larger
and larger. And it's already inyour budget. So you don't have
to worry about coming up withextra money.
Also, if you have at least sixmonths of savings, and honestly,
(07:32):
in 2021, I would say probablycloser to 12. But if you have at
least six months worth ofsavings, you should probably be
okay with going ahead and payingoff your debt first. Now, I am
not a financial planner. I'm nota tax attorney, I am not a
bookkeeper. So you may want todiscuss this your situation with
(07:53):
any financial professionals inyour life. These are just
general guidelines that I'mgiving you here. And also in
your budget, as you're saving orpaying off debt. Don't forget to
give or type that however thecase may be for you. I'm a
Christian, I taught for you thatmay look like more charitable
(08:14):
giving. And it doesn't have tobe a large portion of your
budget because you're stillworking your way through savings
and dead. But giving somethingeven if it's a motivational
$20.01 Hello, go Navy be army.
Give, give, because when yougive it does something
outstanding and positive to youpsychologically, and it gets you
(08:38):
out of this Me, me. I'mconcentrating on myself
mentality and allows you toconcentrate on other people. So
don't forget that line item inyour budget. So where are you
going to get the extra money tosave and pay off debt. My
favorite thing to do torecommend is that you create a
side hustle or get a second job,not my favorite side hustles my
(09:03):
favorite. You can cut expenses,but there's only going to be so
much you can cut, there's onlygoing to be so many things that
you can sell. So instead, I liketo recommend starting a side
hustle so that you have moreroom to maneuver in your budget,
you have more money coming inregularly. And it gives you more
(09:25):
options regardless of whetheryou're saving or paying off
debt. So my recommendation foryou is to choose a side hustle
that can generate the most moneywith the least amount of work.
That means something you alreadyknow how to do well. That could
be writing, some kind ofcoaching, some kind of
(09:48):
consulting virtual assistantwork, what have you. That is
unless you have time to learn ahigh value skill like Web
Design, video editing or podcastproduction. And this doesn't
have to replace your day job,but you don't want to burn out
either. So that's why I'mrecommending that you do
(10:10):
something that either you havetime to learn, or you already
know how to do. You know, webdesign, for example, because
I've been a web designer, manyof you know that, you know, I
can sell a website for three510 $1,000, how much work that
is on my end to produce a$10,000 website is going to be
(10:32):
different according to theclient. But that's an easier
sell for some people with askill set than, say, a $200 blog
post. And yes, you can get paidmore than $200 for a blog post.
But it really just depends onwho you're writing for, what
you're writing and how much orhow quickly, you need to get
(10:54):
paid. So that's my opinion, onsaving money versus paying off
debt, which is to say, it'sgoing to depend on where you
are, and what your situation is,do you have savings already? How
much debt do you have? And whatdoes your budget look like?
Taking all these things intoconsideration? Only you and your
(11:16):
family can make the decisionthat's best for you. That's all
I have for today. Thank you somuch for joining me. Don't
forget to grab your free moneytracker at tracking my coins.com
and I will see you in the nextepisode.
Hello, and welcome to the savvy Brown Girl podcast, a
podcast about personal financeand entrepreneurship for savvy
women. This is Episode One, andtoday we're going to be talking
about saving money versus payingoff debt. Again, I am your host,
Wendy Coop, a financial coach,and pastoral counselor. And I
(00:26):
thank you for joining me today.
Before we go any further, makesure you subscribe to the
podcast to make sure you'renotified when all the new fire
episodes drop. So saving moneyversus paying off debt. That is
a big, big question. Because youmay be carrying a lot of debt,
(00:46):
you may be carrying a little bitof debt, but your savings just
might not be there. And let'sface it, after the year and a
half that we've had, I wouldn'tblame you if your savings has
been depleted a little bit. Justfor context. I'm recording this
episode on June 10, of 2021. SoJune 19 2021, I'm recording
this. And we are still in apandemic, things are starting to
(01:11):
open up and things like that.
But there are still a lot ofpeople without work, though
that's getting better. There area lot of places that are hiring
people. That's good. But overthe last year, year and a half,
a lot of people have had todeplete their savings because of
(01:32):
unexpected caregiving kids beingat home for school, job losses
and things like that. And in themeantime, your debt may have
risen, or it may haveunfortunately just stayed the
same. Either way, now you'refacing the question with your
budget, do you save more money?
Or do you start paying off thatdebt? Well, I have some
(01:55):
suggestions for you. And I justwant to preface that by saying
that every situation isdifferent. So there is no one
right answer here. And I don'tthink you can go wrong except to
not do anything. So as long asyou do one of the two, I think
you're going to be okay. And ofcourse, we are still in a
(02:17):
pandemic. So take it easy onyourself. If you don't get to
$5,000 in savings after a month,it just may not happen that
quickly. And that's okay. So, tostart off, in order to determine
whether you're going to savemoney, or pay off debt, you need
(02:37):
to know how much you have insavings, how much you spend each
month, and how much debt youhave. And by the way, if you
don't know where your money'sgoing, grab your free money
tracker and see what you spentover the next month. And you can
grab that at tracking mycoins.com. Now, a lot of people
(02:58):
in the savings versus pay payoff debt debate. Talk about this
in terms of interest rates, theysay well, you're dead likely has
a higher interest rate, doubledigits, hello credit cards, then
savings, which is usually anabysmal, tiny, tiny rate of
(03:21):
interest that you're getting forletting your money sit in an
account. But in the situationthat we're in in 2021, I'm
telling you, interest ratesdon't matter right now. They
really don't. Because it's moreimportant for you to have money
to pay your bills and to keepthe lights on and food in your
(03:42):
tummy than it is to pay off theSIR MasterCard. Okay, let's just
set some priorities there rightoff the bat. The other thing is,
we also have to consider whetheror not your income is regular,
or semi regular, or whether it'spretty unpredictable. Those of
(04:03):
us who work for ourselves can inthe beginning have pretty
unpredictable income. And thatrequires a special type of
budgeting that we'll get into inanother episode. But I will say
if your income is irregular orunpredictable, then I think you
should save first save the moneyfirst so that you have money to
(04:27):
pay your bills on in the leanermonths. So if you're in a feast
or famine cycle, so to speak,save the money during the
feasting so that you have moneyduring the famine.
Also, I'm going to recommendthat if you are current on your
debt payments and your budget isintact, that you go ahead and
(04:51):
save first. You don't have torush to pay off your debt. It's
really not an emergency to payoff your debt. So you can Go
ahead and save first in thatsituation. And if you're going
to save first aim for at leastthree months of expenses, not
income expenses. The differencesis that if you lose your job, or
(05:13):
are otherwise unable to work,you are not going to have the
same level of expenses as youwould normally live in your day
to day life. So if you arefacing a job loss situation or a
period of time where you can'twork, because you're sick, it's
unlikely that you're going toneed to keep all six streaming
services, you know, up to date,like you don't have to have
(05:37):
Netflix and Disney plus, andamazon prime video and all the
things right like just stickwith one. So you want the
expenses, the necessary regularexpenses to keep the lights on
to keep food on the table, andto keep your sanity. But that
(05:57):
may mean dropping your gymmembership, okay, some of us
still have those. If, however,you have steady income, and all
your household items are takencare of pretty easily go ahead
and start paying off that debt.
And we're going to pay off thedebt from the smallest balance
to the largest balance, we'regoing to pay it off in that
(06:19):
order. That's called thesnowball method. Many people use
it, I'm sure you've heard of it.
But that's how we're going topay off the debt in order so
that you have your small wins.
And you can snowball the paymentfrom the small debt into the
payment of the next largestdebt. So really quickly, what
that looks like is say you havesomething that costs you $42 a
(06:44):
month, and then you have anotherdebt that cost you $100 a month.
But when you pay off the $42 amonth debt, you're going to take
that $42 and then you're goingto apply it to the next largest
debt, in our case $100. So yournext debt payment will be $142.
On on that next debt. And itjust keeps going like that like
(07:10):
in a snowball. So that you getout of debt faster, because over
time, the payments you'reapplying are larger and larger
and larger. And it's already inyour budget. So you don't have
to worry about coming up withextra money.
Also, if you have at least sixmonths of savings, and honestly,
(07:32):
in 2021, I would say probablycloser to 12. But if you have at
least six months worth ofsavings, you should probably be
okay with going ahead and payingoff your debt first. Now, I am
not a financial planner. I'm nota tax attorney, I am not a
bookkeeper. So you may want todiscuss this your situation with
(07:53):
any financial professionals inyour life. These are just
general guidelines that I'mgiving you here. And also in
your budget, as you're saving orpaying off debt. Don't forget to
give or type that however thecase may be for you. I'm a
Christian, I taught for you thatmay look like more charitable
(08:14):
giving. And it doesn't have tobe a large portion of your
budget because you're stillworking your way through savings
and dead. But giving somethingeven if it's a motivational
$20.01 Hello, go Navy be army.
Give, give, because when yougive it does something
outstanding and positive to youpsychologically, and it gets you
(08:38):
out of this Me, me. I'mconcentrating on myself
mentality and allows you toconcentrate on other people. So
don't forget that line item inyour budget. So where are you
going to get the extra money tosave and pay off debt. My
favorite thing to do torecommend is that you create a
side hustle or get a second job,not my favorite side hustles my
(09:03):
favorite. You can cut expenses,but there's only going to be so
much you can cut, there's onlygoing to be so many things that
you can sell. So instead, I liketo recommend starting a side
hustle so that you have moreroom to maneuver in your budget,
you have more money coming inregularly. And it gives you more
(09:25):
options regardless of whetheryou're saving or paying off
debt. So my recommendation foryou is to choose a side hustle
that can generate the most moneywith the least amount of work.
That means something you alreadyknow how to do well. That could
be writing, some kind ofcoaching, some kind of
(09:48):
consulting virtual assistantwork, what have you. That is
unless you have time to learn ahigh value skill like Web
Design, video editing or podcastproduction. And this doesn't
have to replace your day job,but you don't want to burn out
either. So that's why I'mrecommending that you do
(10:10):
something that either you havetime to learn, or you already
know how to do. You know, webdesign, for example, because
I've been a web designer, manyof you know that, you know, I
can sell a website for three510 $1,000, how much work that
is on my end to produce a$10,000 website is going to be
(10:32):
different according to theclient. But that's an easier
sell for some people with askill set than, say, a $200 blog
post. And yes, you can get paidmore than $200 for a blog post.
But it really just depends onwho you're writing for, what
you're writing and how much orhow quickly, you need to get
(10:54):
paid. So that's my opinion, onsaving money versus paying off
debt, which is to say, it'sgoing to depend on where you
are, and what your situation is,do you have savings already? How
much debt do you have? And whatdoes your budget look like?
Taking all these things intoconsideration? Only you and your
(11:16):
family can make the decisionthat's best for you. That's all
I have for today. Thank you somuch for joining me. Don't
forget to grab your free moneytracker at tracking my coins.com
and I will see you in the nextepisode.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.
The Joe Rogan Experience
The official podcast of comedian Joe Rogan.