How Much Should I Save Monthly if I’m in Debt?

Saving money is always a priority, but the amount you save depends on your other goals, such as paying off debt. A rule of thumb is to save at least $1,000 to cover emergency expenses. Consider labeling your emergency account, “Debt-Proof Insurance.” The title is a reminder that the account exists to keep you out of debt. Without cash to pay for emergency expenses, you may find yourself in a never-ending cycle of paying off debt, having an unexpected expense, and having to use credit to pay for the cost. When your account drops below $1,000, stop extra payments towards debt and get your account back up to $1,000. Once it’s at $1,000, use the extra money to continue your debt payoff strategy.

In addition to saving for emergency expenses, save for the expenses you know will happen during the year. This includes scheduled car and home maintenance. These expenses should be a category in your budget.

Once you pay off your debt, celebrate and treat yourself (within reason). Then save at least three months of your monthly living expenses. Ideally, you want to save at least 10% of your income monthly. Prioritize savings like it’s a bill so you won’t have to pay a credit card bill instead.

Recommended Articles

What Should I Do If I Have Too Much Debt?

What should I do if I have too much debt? Paying it off is out of the picture. I am trying to save to move out of my parents’ home quickly due to an eviction. Please help! Submitted by an anonymous SaverLife member. I’m proud of you for reaching out to get help with your… Read more

What loan options do I have for helping my child afford college?

Starting college is an exciting time for parents and students alike. But this excitement often comes with stress and uncertainty about how to pay for school. You may be wondering what options are available for you and your child. If you want to help your child cover the costs of higher education, you have many… Read more