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How do you know whether you should have some money saved up before you pay off debts? If you do save first, how much is enough?

The answer can be difficult to decide because each one of us has different financial circumstances.

Besides the numbers, the two of you may have different ideas on how to start. You can make a case for either way.

So if you two are stumped, here are a few things to help you figure out what is the best move for you.

Pay off Debts First or Build Savings?


Lets' start with numbers – if you have high interest debts like credit cards, then paying off the debts first would be the way to go.

Compared to the interest on savings, you'll come out ahead with being debt free as soon as possible.

The problem with that line of thinking?  It ignores that bad stuff happens to all of us at unexpected times.

Peace of Mind with Saving FirstHow do you know whether you should have some money saved up before you pay off debts? If you do save first, how much is enough? Here's what you need to know

If you’re focused and are putting every single extra penny you have into paying down your debts, you could be caught in a bad predicament if you have no savings.

With a big bill, you may be tempted to go back and charge it to your credit card. It can be a discouraging and frustrating cycle.

I've had a few emergencies pop up while I was trying to pay off my credit cards. I now encourage people to go ahead and save some money first.

How Much to Save?

Dave Ramsey suggests having a baby emergency fund of $500-$1,000, before you start using a debt snowball.

I think that's reasonable starting spot- $1,000 or one month's expenses can cover many hiccups.

Personal Finance is Personal

As you can see, personal finance has some general principles, but there's wiggle room on what to do.

If you two can't agree, set up a money date to talk things over. Don't just mention what you'd like to do, but explain why.

You may just find a solution that makes both of you happy.

Save While Paying Off Debts

There's no rule that says you can't do two things at once.

After you have your starter emergency fund in place, you might consider using something like the 75/25 method so you're knocking out your debts, but still growing your savings.

Whatever you two come up, make sure you're on the same page so you're building up your marriage and net worth.

About Elle Martinez

Elle Martinez helps families at Couple Money achieve financial freedom by sharing tips for reducing debt, increase income, and building net worth. Learn how to live on one income and have fun with the second..