The decision to eliminate your debt or put your hard earned money into a savings account is a tough one. There are many variables to look at before deciding on one over the other. Financial experts recommend putting in up to 10% of your monthly income into your savings account. While having a savings account is a good plan for the future, becoming debt-free is also a good strategy for creating long-term financial health.

Advantage of paying off debt first: When deciding between paying off debt or investing in savings, the best choice depends on the interest you’re being charged on your debt versus the interest you earn on your savings account. The first step in this case is for you to get a big picture view of your debts. Make a list of all your debts to review them. Most likely you will notice that you’re being charged more interest on your debts than you’re earning on your savings account. Don’t forget, money earned on your savings account is tax deductible. So paying off debt first makes more sense. This will also look good on your credit profile because your debt-income ratio will improve.

Advantage of investing in your savings first: One of the reasons that experts recommend putting in up to 10% of your monthly income into your savings account is to create an emergency fund. This financial cushion may come in handy if you needed emergency cash. If you don’t have this cushion then you’ll be forced to borrow more money. Choosing this option will force you to pay only the minimum amount on your debt. This will prolong the life of your debt.

So, which option should you go with? It’s all about finding a balance between paying off debt and investing in your savings. Pay more than just the minimum on your high interest debts, while putting a little into your savings each month. Evaluate your financial situation and then determine the right mix of payments and savings for you. Fill out our short form and you can be on your way to living a debt free line.