Today’s informative post was contributed to Leisure Freak by money master Chris Panteli of the site Life Upswing.

Building up savings is an essential part of becoming financially healthy. At the very least having an emergency fund that can cover 3-6 months’ worth of expenses is recommended. However, if you have debts you may be wondering if you should save or pay off debt first!

How do you know if you should eliminate debt before saving your money?

Good news, this guide will help you understand why you should pay off your debt first. As a bonus, there will be some tips on how to pay off debt quicker.

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The First Steps

OK, you’re in debt up to your eyeballs and are asking yourself what to do first. First, take a deep breath and tell yourself that it will be OK.

The next thing you need to do is to create a realistic budget. Include all expenses to the exact penny and importantly every debt. Once you know exactly what your incomings and outgoings are you can build a plan to tackle the debt.

Why You Should Eliminate Debt Before Saving Money

There are a few reasons why you should concentrate on paying debt down before saving. To start with, some debts have insanely high-interest rates. Debts like payday, pawnshop, and car title loans can have an Annual Percentage Rate (APR) of over 100%!

When debts have high rates like this it’s important to get them paid off as fast as you can. Otherwise, those debts can quickly spiral into enormous amounts of money.

Another reason to pay off    debt first is that in the long run, you will have more money available. Paying only the minimum payment means it takes longer to pay the debt off    and you pay more because of interest charges. When one debt is paid off, you now have that money free to put towards other debts. When all the debts are cleared you now have plenty of money to add to your savings!

What Is The Best Way To Tackle My Debt?

As mentioned earlier you should pay off the high-interest debts first. Once those debts are cleared start tackling the low-interest debts like student loans, car loans, and mortgages.

To pay off your debts there are two strategies you could consider using.

The first strategy is called the snowball method. To begin with, list all your debts by total amount with the smallest first. Then concentrate on paying them off    in that order, from smallest to biggest. When each one gets paid off    the money you are saving can help pay off    the next debt quicker.

Many people find the snowball method works well for them because getting a debt cleared is a psychological boost. Even though at first, it’s only small amounts getting paid off    this motivates many to keep going.

Another method that is popular is called the avalanche method. You will need to list your debt by interest rates rather than the amount owed. Once listed start paying off the debts with the highest interest rates first. Make sure to keep paying the minimum payments on everything else of course. If you have a lot of high-interest debt like credit cards or payday loans, the avalanche method is usually the best one to follow.

Whatever method you choose for paying off debt never forget to pay at the least the minimum payment on everything. Keeping accounts up to date helps avoid falling further into debt with additional fees or higher interest.

4 Tips To Pay Off  Debt Quicker

To get debt-free quicker here are some suggestions that anyone can do. All these tips can result in having more money available, the extra money can then be used to pay off    debts quicker!

Start A Side Job

Starting a side job has never been easier thanks to the internet. You could find work online or offline and earn extra money. Ideas for online side jobs include starting a blog, freelancing, or data entry.

If you prefer working offline think about finding work as a delivery driver, an uber driver, or look around your area for part-time jobs.

Give some thought to your skills and search online for suitable opportunities. There are thousands of things you could do to earn extra money!

Live Frugally

Frugal living is all about prioritizing your spending to make sure not a single cent is wasted. To live frugally cut out all unnecessary spending on things like eating out, subscriptions, and memberships.

When making a budget ensure that every single cent is accounted for.

Make sure to claim coupons, discounts, and cashback whenever you can. To get started check out sites like Ibotta, Honey, and Swagbucks to find offers that can help save money. Switching to cheaper brands when grocery shopping can also be a great way to save money.

Use The 30-Day Rule

A great tip to cut spending is to use the 30-Day rule. When you see something that you want to buy you need to put the money aside for 30 days. At the end of the 30 days, you can buy the item if you still want it. Often the result is you will no longer want the item and can now use that money for anything else, including paying off debt quicker!

Negotiate Bills

A great way to save money is to reduce your expenses. Negotiate every bill you can such as insurance, energy, and cable. Also, cancel subscriptions you no longer need. Don’t pay for the gym, Netflix, or magazines if you aren’t using them anymore!

Should I Save Anything?

Ideally, everyone should at least have an emergency fund that could cover 3-6 months’ worth of expenses. However, if you have lots of debt it makes sense to clear that first, and then you can save more. However, does that mean you should save nothing?

If you can afford it, try to save something each month. When creating your budget prioritize debts and expenses, but if there is some left over do try to save it. Building the habit of saving will be good in the long run. This is because when you do have more money you will find it easier to save all or some of it.

Ultimately the choice is yours. You could put everything towards debts first, then start saving but saving just a few dollars a month soon adds up over time.

Final Thoughts

One thing you mustn’t do is ignore your debts. You can’t eliminate debt without taking action!

Start by listing all your debts and making a budget. Then, follow the advice here and get those debts paid off. Once those debts are gone you have extra money to save, invest, or treat yourself to a dream holiday!

Thank you Chris for contributing this debt elimination guide to Leisure Freak. One of the first steps towards financial independence and the freedom it brings is clearing debt.

Author Bio

Hey, I’m Chris Panteli. I have a degree in Business Economics from the University of Liverpool, own a small fast food business and run LifeUpswing.com. I will help you to make money, save money, and think about money in a way that will give you back your freedom.