Which should I do first, pay off my credit cards or save?


The key to financial success is consistently making financial decisions that improve your financial position and grow your net-worth.  And the two actions that will impact your success the most are eliminating debt and increasing savings.  So, which should you focus on first?  Is paying off credit cards first the better choice or should saving take priority?

Pay off credit cards or save?

Everyone’s different when it comes to which approach they feel is best.  You may be the kind of person that hates having credit card debt hanging over your head and can’t stand the amount of money you’re losing to interest.  On the other hand, you may feel like your world is out of control and downright scary when savings are low or non-existent.  

If you’re married, your spouse is one of the people described above, and there’s a good chance they'd prefer the opposite approach to yours.  So, how can you accomplish what’s best for your finances, and if married, do so with cooperation from your spouse?  What is the approach that’s best for both of you?  The answer to this question is actually quite simple.


To achieve financial success you have to do both.  You have to reduce debt while at the same time save as much as you can.


No matter how aggressively you pay down your credit card debt, not saving leaves you in a financially vulnerable position.  It’s not a matter of if but a matter of when you’ll need to borrow again to get through an emergency or an unplanned expense.  When this happens it causes discouragement and creates the belief that savings, at least for you, doesn’t work.


A lack of savings is the greatest contributor to increasing personal debt.


Saving without paying down credit card debt can be equally damaging.  If you put all your efforts into saving and ignore the growing credit card debt, there’s a very good chance you’ll have to drain your savings to pay off those balances later.  The right approach is to tackle them both at the same time.  


There are financial benefits to this approach, realizing both an increase in saving and a decrease in debt, which provides more financial stability.  More importantly, it provides the emotional an psychological rewards to keep you motivated.  Increasing your savings and eliminating your debt will take time, and focusing on the end goal (reaching the top of the mountain) can seem impossible to achieve. 

Small incremental wins of increased saving and decreased debt provide the confidence that comes with a winning streak, which sustains the momentum that leads to eventual success.


Your 3 keys to success


1. Set clear and specific goals.

This journey to save and to pay off your credit cards will take time, so you’ll need to stay motivated.  Goals paint a picture of the future and help you stay focused on what’s important. 

A Harvard Business School study on goal setting discovered that 10 years after graduating those students who wrote their goals down and had a concrete plan to achieve them were making 10X more income than those students who didn’t write their goals down.  Taking the time to write down your goals and a plan to achieve them makes a tremendous difference.  Just make sure to incorporate the next two steps to ensure you're taking consistent action to make those goals a reality.

2. Use a system.

To guarantee you’re consistently saving and making those credit card payments, you’ll need to manage the rest of your finances well.  Don't allow other areas of your financial life to encroach on your goals to save and pay off debt.  A budget is a financial system that helps you not only manage your finances so that your needs are met, but also makes it possible for you to reach your goals.

Without a system [budget] to manage your money you won't achieve your goals of getting out of debt and saving.


Use a debt snowball payment plan if you have multiple credit cards or debts to pay off.  In a previous blog, I gave a detail description of how a debt snowball works and how using one saves you both, the amount of interest you’ll pay and the time it will take you to pay off your debt.  The best part is that it works hand in hand with your budget.

3. Incorporate some accountability.  

A study by The American Society for Training and Development showed that you are 65% more likely to reach a goal when you commit to someone, and 95% chance if you set regular accountability meetings with someone.  With these kinds of odds, why would you not incorporate some accountability?  This may be the most important step toward reaching your financial goals, so don’t skip it!



Paying off credit cards and building your savings are both actions that will lead to financial success.  If you need to make these a priority in your life right now I encourage you to follow the steps I’ve outlined above.  Make it your goal to consistently eliminate debt, increase savings, and manage your expenses through a pre-arranged spending plan [aka - a budget] and you’ll accomplish more than you ever thought possible.

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