Savings Or Debt: Which Should You Prioritize?
It seems like an impossible task to save while paying off your debts, especially when you are on a limited budget and have to decide which one to prioritize. Here are some considerations to help you decide which one to prioritize, as well as how you can prioritize both with our Access Loans federal employee loan program.
When To Prioritize Savings?
The emergency fund or savings is the most important type of savings everyone should have. Finance experts recommend having 3 months’ worth of living expenses as your emergency funds. This will help you in case you suddenly lose your job, or have an emergency. Because emergency funds are your fallback, it is advisable to prioritize this. Furthermore, if you feel unstable in your job, then an emergency fund is even more important. You can use your savings for your daily living expenses while you look for a new job.
Other types of savings, such as life savings or retirement savings, can be put on hold while you pay off your loans first. Since these are not as urgent, especially if you are still young, you can wait until you are free from making loan payments.
When To Prioritize Debt?
When deciding whether to prioritize debt, the most important consideration is the types of debt you carry. If you carry high-interest loans, such as credit cards, it is a good idea to prioritize paying them off before focusing on your savings. These high-interest debts will end up costing more and, can have devastating effects on your finances, if you don’t try to pay them off quickly. In contrast, if you carry low-interest loans, especially those meant to be paid over a longer period, you may safely choose to prioritize your savings.
Another consideration is how well you’ve been able to pay your debt. If you have been paying your monthly payments regularly, you can choose to prioritize your savings. However, if you are behind on payment for any of your debts, even low-interest ones, it is more sensible to prioritize catching up on your payments first.
How To Prioritize Savings Even With Debt?
When we say “prioritize your savings” or “prioritize paying off debt,” it does not mean that you should ignore the other one. Prioritizing your debt payments, for example, means putting as much as you can toward your monthly payments and saving whatever is left.
However, if you are in an unstable situation at work or simply want to prioritize building your emergency funds but you have some high-interest loans, you can look into our federal employee loan program offered through our Access Loans program. With loan refinancing or loan consolidation, you only have to worry about one, convenient loan so you can start building your emergency fund.
Personal finance is always tricky because everyone’s situation is unique. Reflect on your situation and visit Access Loans for more information.
2022 ACCESS LOANS™ product is offered by Safra National Bank of New York (“SNBNY”) Member FDIC, Equal Housing Lender.
