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This is one question that you’ll likely have to ask yourself, time and time again, as you start making bigger, more important financial decisions over the course of your life. In fact, as you’re reading this, many people across the country are trying to figure out what’s more beneficial to their financial health; paying off debt quicker or saving their money for other things.

It’s not a problem that’s easily solved, simply because everyone’s financial situations will vary. While one person might have accumulated a lot of high-interest consumer debt, another person might not have. The same goes for saving. People’s priorities differ when it comes to the money they earn and save. Some want to store money away to purchase a house or for retirement, while some would rather spend their money on living their life to its fullest before they start to buckle down.

Spring Clean Your Finances

Paying Debt First

Debt, especially consumer debt from accumulated credit card balances, is something that the vast majority of us will experience at some point. Being that consumer debt is racked up over time, it can take a little while before we realize just how bad it is. High-interest debt is a particularly bad problem because the more a consumer goes without paying it off, the more expensive it’s going to get. And, if you’re a frequent credit card user, chances are you’ll need to use your cards again before you’re able to pay off your full balance. Then, if you continue to not pay the full balance from month to month, you could end up in a cycle of revolving debt.

Having trouble paying your credit cards? Learn how to reduce your credit card debt. 


The advantage that comes with paying your debt first is simple. You’ll be able to break the cycle of debt that you’re in and start saving properly. Actually, if you have a lot of high-interest debt, it’s probably better to just bite the bullet and pay off as much of it as you can, as quickly as possible. At the very least, your minimum monthly payments will decrease, making the debt more affordable in the future.

Remember, the ramifications of not paying your debt can be just as, if not more severe than not having money saved. Failure to pay your debt can lead to you being subject to the onslaught of a collection agency, who might seek wage garnishment or other legal actions. This scenario isn’t limited to high-interest credit card debt either. There are other types of loans that can certainly land you in hot water if you fail to pay them. Missing a payment on any type of debt is never a good idea, you’ll be charged fees, damage your relationship with your lender or creditor, and your credit health will take a serious hit.

In the long run, paying down debt saves you money, money that can then be put towards for productive uses, like retirement, being a homeowner, or being prepared for an emergency.


The largest disadvantage with this choice is that if you choose to put all your money toward paying down your debt, you may end up with little to nothing left for any unexpected expenses that could pop up in the near future. Unfortunately, you never know when an emergency could arise that you desperately need money for. If all your money has been put into debt repayment, you’ll subsequently have no emergency fund set up to help bail yourself out of that sticky situation. You’ll then be forced to charge everything to your credit card(s), thus creating even more revolving debt, even though you’re trying to get rid of it.  

You’ll also have less to invest in other avenues, such as your Registered Retired Savings Plan. This means that you might not be able to retire by the typical age of 65, and will have to continue working into your seventies.   

debt management options

Saving First

When it comes to saving, one of the most important practices you can maintain is to use part of your hard-earned money to create a solid emergency fund. Actually, many financial experts will recommend that you have about 6-months worth of typical expenses in your emergency savings. Then again, a good portion of the money you make should also be dedicated to your retirement, which you can do by investing in your R.R.S.P. account. Nonetheless, the benefit of prioritizing saving over paying down debt is plain as day, you’ll have access to money for your current and future expenses, just in case a situation occurs that’s out of your control.


That brings us to some of the other advantages that come with saving your money. The main benefit is, of course, that in the event of an unexpected expense, you won’t have to wait until your next paycheck before you can deal with it. However, there are other areas where saving is a major benefit to you.

Once you have extra money, you can set up an automatic transfer to deposit a specific amount, on a specific day(s) every month, into your RRSP. In fact, a solid RRSP account is a great financial tool. First off, any money you contribute to your RRSP is tax deductible. With a plentiful RRSP, you can not only retire earlier, and with more comfort, than those with little to no savings, but you can also take advantage of the RRSP Home Buyers Plan, should you decide to purchase a house in the future. The H.B.P. allows you to withdraw money from your RRSP to finance the down payment on the home of your choosing. You’ll then have 15 years to pay that money back into your account.


The disadvantage that comes with saving your money instead of paying debt with it is fairly self-explanatory. Letting your debts get out of control can lead you down a steep path to even further debt issues and financial problems in the future. And, once you’ve fallen down this path, it can be extremely hard to get back up.

The longer you let your debts accumulate, the harder it will be to pay them off. As a result, your credit will be impacted negatively, which causes your credit score to drop and makes it harder for you to get approved for any loans you might need in the future. Even people who have lots of money can still have a low credit score, so imagine having no money because of your constant debt, combined with a poor credit score.

Which Choice is Better?

The problem with this particular argument is that it’s very two sided, and is largely dependant on a person’s specific financial situation. Many financial professionals will tell you that paying your debts should be the top priority. Then again, it depends on just what kind of debt you’re looking to pay off. High-interest debt can lead to significant financial problems, so it can be best to deal with it before it gets out of hand. However, lower interest debt from other kinds of loans can be easier to deal with because of the lost cost and set repayment schedule.

So, your best bet will likely be to work towards stability, using both options to come up with a balanced budget and financial lifestyle.When it comes to high-interest debt, it can be more beneficial to dedicate as much money as you can into paying it or, at the very least, surpassing the minimum monthly payments. You can then set the rest of your earnings aside in your emergency fund. The best part about a typical savings account is that you can add anything you want to it. After all, every dollar counts. Then you’ll have something to help yourself out, however small that amount might be, in case anything should go wrong. Once you’ve found a way to balance your payments and savings, you’ll have learned an important lesson about financial stability. 

Bryan Daly avatar on Loans Canada
Bryan Daly

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.

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