To escape the hamster wheel of debt, experts recommend saving for emergencies while keeping up with credit card payments. This allows you to pay for unexpected purchases with cash instead of credit.
Reina Takahashi for NPR
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Reina Takahashi for NPR
This story is excerpted from Life Kit’s Guide to Paying Off Credit Card Debt. Sign up for the month-long newsletter series here to get expert strategies to save money and spend less.
So you want to pay off your credit card debt. But you also want to build up your savings account. Is both possible?
Yes, say financial experts – and it is actually recommended.
“If you don’t have a decent pile of savings and another emergency or unexpected situation arises, you’ll end up right back in credit card debt,” says Yanely Espinal, financial educator and author of Take care of your money.
With careful planning and budgeting, it is possible to pay off your credit card debt aggressively while Saving for the future. So resist the urge to put all your money into your credit card payments. Instead, use this moment as an opportunity to get your finances in order.
In this step-by-step guide, Espinal and Tania Brown, an Atlanta-based certified financial planner, explain how to keep up with your payments while avoiding the debt hamster wheel.
Table of Contents
Step 1: Track your spending and see where you can save
To pay off your credit card debt, you need money. It’s time to rethink your budget.
🗓️ To see where you can save, track your spending for 30 days. Brown encourages her clients to use a paper calendar, but you can also use a notebook.
Try not to use an app that tracks your spending for you. says Espinal. Manually writing down your daily expenses helps you “see the details of your problem areas.”
Then review all your expenses and ask yourself:
What expenses can I avoid completely? Maybe you can nip your matcha latte habit in the bud or cancel that magazine subscription you rarely read.
What can I temporarily cut? “You don’t have to cut everything and pay off debt at the same time,” says Espinal. This deficiency could tempt you to spend again. Instead, think about expenses you can avoid for a few months. For example, if you pay for multiple streaming services, cut out some that you don’t use often.
What else can I do to save money? Rethink your spending habits. Try to spend quickly, resist impulse purchases, or research ways to save money at the grocery store. Or maybe you want to try something more drastic, like moving to a place with cheaper rent or getting a roommate.
What can I do to increase my income? If you can’t find extra money in your current budget, you’ll have to find it elsewhere, says financial educator Rita-Soledad Fernández Paulino. This could mean getting a better-paying job, asking for a raise, or taking on a part-time job.
🚨 Consider: The more funds you set aside to pay off your debts, the faster you can pay them off. The amount is entirely up to you.
Let’s say you’ve done your analysis (and done some thinking) and decided to cut your budget slightly. Your cuts could look like this:
That’s a decent amount of money to put towards your debt journey.
Step 2: Set up emergency and “sinking” funds
As you begin your debt payoff plan, you should avoid using your credit card for large purchases that you can’t afford. To do this, you’ll need to set aside funds for emergencies and upcoming expenses, says Brown. The idea is to pay for things with cash and not rack up more debt on your credit card.
Here’s what you need to get started:
🚑 About $500 to $1,000 for emergencies. This can help cover things like an unexpected hospital bill and car and home repairs. Once you’ve paid off all your debts, Brown recommends saving three to six months’ worth of expenses for your emergency fund.
No matter what you spend on emergencies, consider setting up an automatic deposit from every paycheck so you don’t have to remember to prioritize.
🎁 A “sinking” fund, or money that you know you will spendsays Brown. The quantity depends on your individual needs. For example, maybe you know that next year you’ll need to buy replacement items for your first aid kit, Christmas gifts, and new tires for your car. Starting to put this money aside now will help you stay debt-free later and avoid last-minute panic.
Step 3: Create a budget
How do you make sure you stay on top of your savings and debt payments? This is where a budget can come in handy, says Espinal.
If you don’t already have a monthly budget, create one. A budget should include line items for all of your monthly expenses, including housing, food, and transportation. (Need more advice? Check out our story on creating a budget.)
🚨Then you will do it Add line items for “emergency fund,” “sinking fund,” and “credit card debt.”.”
Remember the $270 we saved in Step 1? We’ll use this to pay off credit card debt. You can use a free online debt calculator to help you decide how much you should pay on your credit card.
You should make the minimum payment using your credit card. If you don’t, you’ll face late fees, your credit score will drop, and eventually your debts will go into default. Making extra payments will help you pay off your debt faster and reduce the amount of interest you pay.
So with the extra $270 from your new budget, you could split your money like this:
Once you’ve paid off your credit card and replenished your emergency and remaining funds, you can start putting the extra money towards your next financial goals, whether that’s paying off another credit card or saving for a major purchase.
Did you like this story? Sign up for the Life Kit Guide to Paying Off Credit Card Debt You can find further tips on, among other things, which card you should pay off first.
The story was edited by Malaka Gharib. The visual editor is CJ Riculan. We would love to hear from you. Leave us a voicemail at 202-216-9823 or email us at LifeKit@npr.org.
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https://www.npr.org/2026/07/28/nx-s1-5866642/yes-its-possible-to-save-money-while-paying-off-credit-card-debt-heres-how
