Adam and Beth* struggled with goals of both paying down debt and building some savings at the same time. It was hard, but they had to find a way to do it or their long-term future could be at stake. They had come to understand that time—lots of time—is needed to turn retirement savings into enough money to support them in a comfortable retirement. They had come to understand the power of compound interest for their savings and the high cost of high interest rates on their remaining debt.

Everyone’s situation is different, yet there are some basic principles that can help situations like Adam and Beth’s*.  Here are some steps to consider on the path toward balancing saving and debt reduction. It is possible to do both. It just takes focus, self-discipline, and commitment. But if you have read this far, you can rise to the occasion. You can do it!

Establish an emergency savings account

Maybe you have to start small, but it is important to start growing your emergency savings account. It is shocking how many Americans don’t have enough cash reserves to handle even a $500 emergency. You can change that. Just start. Even a dollar or so every day in a cookie jar will get you started. Open a savings account. Set a personal goal to add to the account until you have a $500 balance. At that point, you will be ahead of a large number of Americans on building personal savings. From there, you can keep building your reserves until you reach the ideal, which most financial planning professionals agree is three to six months’ worth of living expenses in a readily available form. This will go a long way toward covering any of the little financial emergencies life hands us from time to time. If you lose your job or get sick for an extended period of time, you will have the comfort of enough reserves to keep your household and family going.

Get going on retirement savings

If your employer offers a retirement plan such as a 401(k) or 403(b) plan which offers matching funds on your contributions, set a goal to contribute at least enough to qualify for the match. The matching funds are free money that you will not get unless you contribute enough to qualify for the match. If you don’t have a retirement plan at work, open a traditional IRA or a Roth IRA. There are no matching funds with an IRA account, but you can set up systematic withdrawals from your bank account to resemble the automatic savings of an every paycheck contribution plan inherent in the employer-sponsored plan. The earlier you start, the more you can benefit from the magic of compounding interest.

Tackling high interest rate debt

If high interest rate credit cards or other high interest rate debt are part of your life now (anything above 9 or 10% would be considered high interest), tackle that debt next. There are several methods suggested by experts on how to do this, but my personal favorite is the psychological boost that comes from using the “snowball method.” Make a list of all your debt, including the current balance, minimum payment required, and the interest rate. Commit to making at least the minimum payment on every account every month. Set up automatic drafts on your bank account so you don’t risk ever being late in making your payments. This will help your credit score and contribute to your peace of mind. Focus any extra dollars you can on the smallest balance account first. When that account is paid off, focus on the next biggest balance and keep going until all accounts are paid off. The psychological boost comes from seeing the number of accounts dropping one by one, each bringing a new, higher sense of control and confidence about your financial future.

Taking on lower interest rate debt

Once you have high interest rate debt paid off, you are steadily building your emergency cash reserves, and you are getting 100% of the match your employer offers on your company’s retirement plan, it is time to focus on lower interest rate debt, such as student loans. If you have more than one student loan or other lower rate debt, focus on one account at a time, similar to the “snowball” method described above. That will give you a lot of flexibility in managing your cash flow if you were to face an unexpected emergency beyond what your available cash reserves could cover.

Start writing out your goals

Goals that are written down have an increased likelihood of being achieved.  Break your goals down into bite size pieces. Make good choices based on your goals, not what feels good in the moment. Is that expensive dinner out really going to change your life, or would those dollars help make it possible to plan a vacation with the family next year? Little things add up. Look for leaks in your budget. Track where your money goes and make intelligent goals based choices about how you spend every dollar. Over time, you will be glad you did, and you too will begin to feel that sense of confidence and control about your future that so many people are seeking. You too can achieve financial peace of mind!

A personal message and closing thought

If you want more guidance on planning for future, be sure to visit my website at There you will find many helpful, free resources such as blog posts, videos, and more that will assist you in managing your financial life. If you haven’t already obtained a copy of my book, “The Financial Briefing: Answers to Life’s Most Important Money Questions,” visit my Amazon page to order your copy.

f you would like a free, no obligation private consultation directly with me to evaluate your situation, contact me directly by phone at 501-823-2171 or send an email at I love helping people plan for their financial future and it would be my pleasure to help you. I look forward to hearing from you.


Other Important Information

The opinions expressed in this commentary are those of the author and not necessarily the views of United Capital Financial Advisers, LLC.  Certain statements contained within are forward-looking statements, including, but not limited to, predictions or indications of future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties. This material is not to be relied upon as a forecast, or research or investment advice regarding a particular investment or the markets in general, nor is it intended to predict or depict performance of any investment. United Capital does not warrant the accuracy or completeness of the information. The commentary is intended for information purposes only, is not a recommendation to buy or sell any securities and should not be considered investment advice. Past performance doesn’t guarantee future results.

*Adam and Beth are hypothetical investors created here for illustration purposes only.

Subscribe To The Blog

Fill out the form below to stay updated.

  • This field is for validation purposes and should be left unchanged.

How financially prepared are you right now?

Don't guess. Take Eric's Retirement Savings Assessment and discover where you might be able to improve your financial plan or start developing a plan to shape your financial future.

Contact Eric Hutchinson, CFP®, Today!

Get started with designing your personalized plan to help you achieve Financial Peace of Mind

(501) 222-8815

Follow on TwitterFollow on FacebookFollow on TwitterFollow on Youtube