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Money Myth Number 1: "There's no point in saving while you're paying off debt"

Rejecting Perfectionism Steps for Better Finances Paying off debt

I used to love this myth.  I totally got it.  Just look at the interest rate on my credit card.  Now look at the interest rate in my savings account.  How dumb would it be to put money in the savings account, earn a tiny amount of intertest, and then pay the higher rate of interest on the credit card?  Totally dumb.  I would never do that – “pay off the credit card as fast as you can” was my logical rule, and I lived by it.

Every time I carried a balance on my credit card, I stopped spending, cleared out my savings and paid it off as fast as I could. 

People who feel the weight of their debt hanging over them also agree with this one.  “I hate that debt - I just want to get rid of my debt as fast as possible.  I’ll save once it’s gone.”

And my fellow logic-lovers and the debt-haters both have a point.  If you write down the numbers and add them up, paying off debt IS better than saving.  Getting rid of something you hate and resent IS important.

So why is this one a myth?  Because following a rule of paying off debt as fast as possible, and not saving any money, assumes two things:

  • Firstly: that no emergencies or unexpected expenses will happen (at least for a while)
  • Secondly: that people are logic machines with no needs, wants or complicated emotions. 


I did pay off my debt under the “I can’t save money…” myth.  I deprived myself for a short time, threw every cent I had at the debt, and I would pay off, or almost pay it off.

Then life would happen.  The car needed new tyres.  Or the washing machine broke down.  Or the cat got into a fight and needed to be taken to the vet.   There was no cash reserve.  Solution?  More debt.  Which was incredibly depressing – here I am, in debt, AGAIN, after I made all that effort.

Or else I would stop being a logic machine, and react to the feeling of deprivation I had.  My willpower would give out.   My thought process would go something like this: “You know what?  I work hard.  I’ve ben virtuous for so long, I’m completely sick of myself.  L’Oreal is right!  I DO deserve it!  And since I’m already spending, a little more isn’t going to make any difference.  Might as well be hung for a sheep as for a lamb.”

When the next credit card bill came in, I would, yet again, stop spending and pay it off as fast as possible.  Rinse and repeat.  Rinse and repeat.  When I read the term “Yo-yo debting” in Karen McCall’s book “Financial Recovery” I knew exactly what she meant.

I followed her “save your way out of debt” idea.  It felt weird at first.  So illogical. Instead of putting everything I could into debt repayment, I paid off some debt, and saved some money.

Having the debt hang around for longer felt uncomfortable to me at first.  But do you know what felt really good?  Being able to pay for those unexpected expenses from savings.  Watching the level of debt get lower and lower, without bumping back up again.

And it worked permanently, unlike the “Don’t save money when you still have debt – pay that off as fast as possible” myth, which only worked temporarily.

Money Truth Number 1: Save your way out of debt

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