How To Save Money While Paying Off Debt: A Practical Guide

Paying off debt and saving money might sound like contradictory goals, but they don’t have to be. With the right strategies, you can make progress on your financial goals without feeling like you’re sacrificing everything. In this blog post, I’ll show you how to balance these priorities so you can reduce debt while building a safety net. Let’s dive in!

Why Save While Paying Off Debt?

It’s easy to think you should focus 100% on paying off debt before saving a penny. But life doesn’t stop just because you’re on a debt-free journey. Emergencies happen—cars break down, medical bills come up, or that unexpected home repair hits your budget. Without a savings cushion, you might end up relying on credit cards, which can send you back into the debt spiral.

A small emergency fund (think $500–$1,000 to start) can give you the peace of mind to stay on track with your debt repayment plan.

5 Tips to Save Money While Paying Off Debt

1. Create a Budget That Works for You

A budget is your roadmap to success. Start by tracking your income and expenses to see where your money is going. Use tools like apps, spreadsheets, or even a good old notebook to organize your spending.

👉 Pro Tip: Use the 50/30/20 rule as a guide—50% for needs, 30% for wants, and 20% for debt repayment and savings. If your debt feels overwhelming, shift part of the “wants” category toward your financial goals.

2. Automate Your Savings

Even while paying off debt, set up an automatic transfer to your savings account. It doesn’t have to be a lot—$10 or $20 a week can add up over time. Automating makes saving effortless and removes the temptation to skip it.

Think of it this way: You’re paying yourself first, even while tackling debt.

3. Negotiate Bills and Expenses

Many of your monthly expenses aren’t set in stone. Call service providers to ask for discounts, switch to lower-cost plans, or cancel services you no longer need.
Here’s where you can start:

Internet and cable providers
Insurance (home, auto, health)
Subscription services (streaming, apps, etc.)

Bonus Tip: Use apps that track and negotiate your bills for you, like Truebill or Billshark.

4. Cut Costs Without Feeling Deprived

Small lifestyle tweaks can lead to big savings. Here are a few ideas:

Cook at home more often (meal prepping saves time and money).
Shop with a grocery list to avoid impulse purchases.
Buy generic brands instead of name brands.
Embrace free or low-cost entertainment, like hiking, library visits, or community events.

Saving doesn’t have to feel like a punishment. Focus on things that matter to you and cut back where it doesn’t.

5. Choose a Debt Repayment Strategy That Fits

There are two popular debt repayment methods:

The Snowball Method: Pay off the smallest debt first to build momentum.
The Avalanche Method: Focus on high-interest debts first to save money on interest.

Pick a method that motivates you and stick with it. You’ll feel empowered as you see progress.

Bonus Tip: Use Windfalls Wisely

Got a tax refund, bonus, or unexpected cash? Resist the urge to splurge. Instead, divide it between savings and debt repayment. For example, use 70% to pay down debt and stash 30% in your savings.

What About Investing?

If your employer offers a 401(k) match, take advantage of it—it’s essentially free money. Otherwise, focus on building savings and paying off high-interest debt before diving into investments.

Stay Motivated on Your Journey

Balancing saving and debt repayment takes discipline, but don’t forget to celebrate small wins along the way. Paid off a credit card? Treat yourself to a small reward (within reason!). Built your first $500 emergency fund? Pat yourself on the back—you’re making progress.

Conclusion: You’ve Got This!

Saving money while paying off debt is all about finding balance and being intentional with your finances. Start small, stay consistent, and remember—it’s not about perfection; it’s about progress.

With these tips, you’ll be well on your way to financial freedom and peace of mind.