If you spend any time reading personal finance blogs, you will eventually stubble across the age old question (and possibly a debate or two), what is harder, paying off debt or saving money? I, myself, have pondered this question on more than one occasion.
Having recently spent 20 months paying off $40,103.60 worth of debt I would absolutely say that paying off debt is harder. I hated, more like loathed, the feeling of owing someone money. I wanted to free myself from that clutches of debt as soon as I possibly could so that I could start pursing financial independence. I dreamed of a day that I wouldn’t have to owe anyone, or rely on anyone else for money. So, the question is answered, paying off debt is harder than saving money.
But … (there is always a but)
Having also recently spent the last 5 months strictly saving, I am not so sure paying off debt is harder than saving money. Lately, I have been trying to live by the mind frame of “the biggest payment you should make every month should be into savings.” And it has been! But the more savings goals I have the harder I find it is to stay focused. You see, the feeling of owing someone money, the thing that I desisted about being in debt, was also the thing that held me accountable every month in paying it off. Even if I decided not to accelerate payments on my debt, I was still responsible every single month to make the minimum payment. However, when it comes to saving money, the only person holding me responsible is… you guessed it … me.
I also have a bad habit (I should say had an old habit) of knowing I have money in my savings account and justifying spending it. Example: “These shoes are $100, but I have $10,000 in my savings. I can afford it. I’ll just take it out and replace the money later.” It’s this type of mind frame that can get me in trouble (and has many times in the past). Even after all the things I have learned through bad money mistakes and paying off debt, I will always have challenges to my frugality. I just love shtuff! I love pretty home décor items. I love old houses that I can put life into again and make my own. I love the idea of a cabin in the woods. I love interesting new recipes, restaurants and traveling. And even though I have learned from my past mistakes and don’t mindless spend anymore, the struggle not to is eternal. Debt was temporary.
Another difference between the saving and paying off debt is time. I worked myself to the bone for almost 2 years to pay off my debt, which was a long period of time, but now I’m in savings mode, ad infinitum. One was time limited and the other is forever. And after doing both, the limited one seems easier.
Right now I have so many savings goals pulling me in different directions. I’m saving for a wedding, building up my “Money to protect your other money. Oh, and also potential reckless behavior” aka emergency fund, saving for a house and retirement. I also go back and forth on if I should make accelerated payments on a car that I have a 0% interest rate on. (Yes, paying off the car is paying off debt, which I’d like to do, but not accelerating the monthly payments allows me to save more money, see the problem here… so many decisions.) I’m not sure which one gets priority and I tend to flip between them. And although I had multiple forms of debt to pay off in the past (13 student loans and a car) and should be used to balancing multiple money goals, using the snowball method, I focused solely on paying off the debt with the highest balance off first. It didn’t matter if I had 13 student loans, my goal was fixated on which loan had the biggest number attached to it which made it easier to hold my attention – I only worried about one loan at a time. That was much easier than having multiple savings goals that I deem equally important.
So what is a girl (or boy) to do? Well, here are a few tips for anyone who has decided saving is harder than paying off debt like I do.
1.Break down your “saving goals” into mini goals. I have found it is much easier to stay focused when you have one particular goal you are working toward at a time (but if working on multiple goals at a time works for you, that’s fine too). I need strict order in my life much like when I was paying off debt. Instead of bouncing around from goal to goal, I have now calculated out how long it will take me to save for each one. I focus all my attention on that particular savings goal in that timeline until it is reached and then I move on to the next one*.
2. Have a solid number you want to hit. With each mini goal, set a particular number you want to reach. For example, after calculating what everything will cost for our wedding, jmr and I have a set number we want to save for. Once we hit that number (should be there next month. Woot woot!), we will move on to our next mini goal. Keep in mind, like paying off debt major saving milestones can’t be done within a day or week. Remind yourself it takes time.
3. Document your progress. I am an extremely visual person. I need to see my “wins” to feel confident in the progress I am making and ease the stress of the process. I love looking back at my spreadsheets to see how far I have come. This is also the best way to keep me accountable for my spending.
4. Revisit your goals. It is totally okay to change the direction of your savings goals. I have done it multiple times already. Just the other day I was looking at my spreadsheets and decided I would sleep better at night if I upped my emergency fund from 3 months of savings to 6. I would suggest periodically reevaluating your goals to make sure they are still working for you.
Whether you are in the saving mindset, paying off debt mindset, or both, how you go about it is a deeply personal decision. I don’t think there is a right way or wrong way, just ways that you can make it easier on yourself. And if you’re trying, I think that’s really all that matters.
What do you find harder, saving or paying off debt?
*retirement probably doesn’t work for this tip, and should be saved for monthly on top of your other savings goals.