A few weeks ago, I said that my biggest financial goal was to pay off my debts. That was actually the main reason I started PoundWise Journey. However, after giving it some thought, I’ve decided to now prioritise my savings over paying off debt.
It’s almost an age-old personal finance question: should you build an emergency fund or pay off debt first? A lot of people struggle with this question, and I did too, until I sat down and thought about it.
Originally, I planned to save 10% of my income and split that money 50/50 between paying off my debts and building an emergency fund. But over time, I realised that wasn’t the best strategy for me, and I’ll explain why shortly.
The decision to prioritise my savings isn’t one I’ve taken lightly, but I feel like it makes sense for my situation right now.
Why I Made These Changes
Here are 4 reasons why I decided to make these changes and prioritise my savings over paying off my debts.
1. My Debts Are Currently Interest-Free
My credit card has a 0% promotional interest rate until April 2026 (as long as I make at least the minimum payments each month).
I also have a Very account with a ‘Buy Now Pay Later‘ balance, which is also interest-free if I pay the balance before the deadline. I’m currently paying £20 per month towards it, so I’ll have the balance paid off before the deadline.
Since I’m not being charged any interest right now, there’s no rush to pay these debts off aggressively. Also, my savings account earns 5.25% interest. So it makes more sense financially to let my savings grow.
2. I Don’t Have a Financial Safety Net
At the time of writing, I have around £90 in savings. That’s not enough to cover any unexpected costs, such as:
- Replacing a broken appliance (fridge, freezer, etc.)
- Buying a new phone if mine gets lost or stolen
- Extra driving lessons (my test is coming up soon, so I might need to pay for extra lessons)
- Emergency dental treatment
While I do receive Universal Credit, life still happens. I’d rather build a financial cushion now than rely on my credit card again if anything unexpected did happen.
3. I Could Qualify for Another 0% Balance Transfer
I already have a few credit cards with zero balances, some of them being balance transfer cards. If a new 0% offer becomes available closer to the end of my current promotion, I could move my balance over and continue to avoid paying interest.
There’s no guarantee of that happening of course, but I do get emails now and then with these kinds of offers, so it’s a possibility worth keeping in mind. If I were to get another offer, then it wouldn’t be as urgent for me to throw all of my spare cash at the debt.
4. I Can Use Savings to Pay Off My Debts Later
If I get to April 2026 and I don’t receive any offers to transfer my balance, I could always use my savings to clear a chunk of the debt.
Right now, my debt costs me 0% interest, while my savings earn 5.25%. But if I let that promotional period expire, my credit card interest rate jumps to 24.9%. At that point, using my savings to pay off some of the balance quickly would be a smarter move.
My Updated Financial Plan
This is what my updated financial setup looks like:
- £25 per month on my credit card (slightly above the minimum payment)
- £20 per month on my Very account
- £78 per month into savings (10% of my income)
- Any end-of-month surplus also goes into savings
You may have noticed that I’m paying off more than minimum payments on my credit card. That’s merely for budgeting reasons so I know I’m paying the same amount every month. The minimum payment on my credit card is 1% of the balance, but I prefer round numbers to keep things simple and consistent.
As I’ve mentioned before, I like to start each month with a clean slate. So just before payday, I move any leftover money into savings. This setup reflects my change towards prioritising savings over debt, which allows me to cover my essentials, stay on top of debt repayments, and slowly grow my emergency fund.
Flexibility Is Key
In my earlier post about paying off debt, I talked about staying consistent and being patient. I still believe in that, but I’ve also learned that it’s okay to adapt your plans when necessary.
This doesn’t mean I’m giving up on becoming debt-free, it just means I’m changing my approach slightly. This way, I’ll be in a stronger position when I do go back to attacking my debts more aggressively later.
If something changes, like starting a new job, or reaching the end of my 0% period, I’ll adapt things again and act accordingly.
Final Thoughts
If you’re in a similar situation, here’s something to consider: you don’t have to strictly follow a fixed formula, you can make a plan and adapt things as your situation changes.
Changing your plans isn’t a sign of failure. It just means you’re showing awareness to your situation and taking control of it.
Everyone’s situation is different, but if you’ve ever wondered whether to build an emergency fund or pay off debt first, I hope my thought process helps you decide what’s right for you.
I’ve chosen to prioritise savings over debt because I want more flexibility, more stability, and more control over my finances.
And once I’ve got more money in my emergency fund, I’ll be ready to tackle my debts with the confidence of having that safety net behind me.