Saving Money While In Debt: Is It Possible?
It would be great if we had all the money we needed to buy a house, a car, go on holiday and get that new leather jacket we've been eyeing off. But unfortunately this just isn't the case.
Most of us are in some form of debt, be it a mortgage, personal loan, credit card or just owing a friend some money.
Debt isn't a bad thing. Sometimes debt is essential – like when you're buying a house, and if it is supported by an appreciable asset like a house, then most people would argue debt is a good thing. This is because it offers you the opportunity to make money in an area you wouldn't have otherwise been able to.
There's an ongoing debate about whether or not you should (or can) save money while you are in debt. The argument goes like this – if you are in debt, and you save money, that money isn't really yours to save. Therefore, it's not really possible to save money at all while you are in debt.
This isn't the whole story however. In my opinion, there are many sides to look at the problem of saving money while in debt.
We need money. This is going to remain the case until a major change happens in the world. If something happens in your life – you get sick, you can't work, your belongings get stolen – you're going to need money. This isn't even a ‘what if' scenario – one of these things is bound to happen at some point during your life.
If you don't have a form of credit, be it savings, credit cards or other methods of getting money, you're going to severely struggle. In this case, savings are essential.
But you also need to look at fees and interest you are paying. How much are you really spending on your debt? If it's a high interest payment that you'll never win, such as credit card interest, your number one priority should be to pay off it off. This should come before savings and anything else.
Something like a mortgage which is low interest and backed by an appreciable asset should leave you more room to save.
This is a complex area and I'd be interested to hear your thoughts on it. Do you save money while you're in debt? Let me know in the comments below.
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