Which is more important: savings or paying debts?

[ashleybear]

Hello!

Couple general questions. I’m just starting my first full time job, so I’ll have money to either throw at debt or to build up a savings.

I’ve currently budgeted a 20/80 split putting 20% of my spare income to savings and 80% towards credit card debt. My CC is ~3k right now, but I have virtually no savings (150 or so). Does that sound alike a good idea, to put more towards the interest-building CC? With that split I’ll have ~200$ in CC debt left and ~900$ saved by the time my short term job is done.

I’ve also heard though that paying your CC off completely will tank your credit score and I need a good credit score to make sure I can get an apartment in December.

Any advice welcome, but plz don’t just tell me to cut costs— I live on very extremely little, there are no costs to possibly cut , I just don’t know what to prioritize long term z . Thank u *** bless!

 

[brianitos]

@ashleybear Your credit score won't tank from paying off your cards, but it can go down if you close cards or stop using them entirely.

Paying off your card earlier saves you more money in interest, but you can't pay for certain things like a security deposit using credit. You need money in an account for that. Consider putting all or almost all of your paychecks toward CC debt at first, and then almost all to your account in the last couple months before you want to get the apartment. That would minimize the interest you pay.

 

[ashleybear]

@brianitos Good point, I’ll start with CC and end with savings. I’ve got around 5k to spend between the two of them, and the general consensus seems to be keep more in savings, so I’ll aim to split closer to 50/50 I think. Thank you!

 

[karenm]

@ashleybear You’re probably getting hit on that credit card debt interest fairly hard so any savings you gain are realistically going out the door to that. But honestly, if you have very little saved, keep saving! Make your minimum, try and pay extra until you save at least $1000 or so. Give yourself a little cushion, and then destroy the debt before saving more. That’s my advice!

 

[resjudicata]

@ashleybear What’s the point of having savings when your credit is tanking?

I used to think having $20k in the bank was more important than paying bills. I learned harsh lessons more than a few times in life.

 

[kamalb]

@ashleybear I think you've got it worked out already. The 80/20 split sounds good. As much as you want to pay down debt, if you have no savings, any extra expense winds up plunging you back into debt. You'll pay more interest than if you put 100% toward debt, but getting into the habit of saving may be worth it in the long run.

 

[eltepuffcred1973]

@ashleybear There's a lot to consider. Are you good with budgeting? Will your new job have a retirement savings plan such as a 401k? Do they have a health plan?

I would suggest getting your savings to 3k at least. This will cover any emergencies such as car problems, unexpected taxes, appliances going out, etc. Then when you have that use your excess money to pay the credit cards off.

I use my credit cards now for convenience. For the points. I set money aside from my paycheck to cover any purchases. If I don't have the money for it then I won't by it. Having credit cards can lead to overspending. I've been down that road.

Hope any of that helps!

 

[ashleybear]

@eltepuffcred1973 i’m quite proud of my ability to stick to my budget! Quite frankly I’m young and figure the world is gonna collapse before I retire so I’ll worry about that once I’m more stable employment wise, lol. Thank u for the advice !!