Should You Pay Off Debt or Save First? (Australia 2025)

Should You Pay Off Debt or Save First? (Australia 2025)

This is one of the biggest financial dilemmas Australians face — especially in uncertain times like 2025.

Start with an Emergency Fund

Before aggressively paying off debt, build a small emergency fund of $1,000–$3,000 to cover surprise expenses.

High-Interest Debt Takes Priority

If your debt has interest rates above 10% (like credit cards), paying it off saves more money than most savings accounts can earn.

Balance Both with a 70/30 Strategy

  • Put 70% of extra cash toward high-interest debt
  • Put 30% toward savings goals or emergency fund

Use Windfalls Wisely

Tax refund? Bonus? Split it — pay down debt and top up savings. That way you build peace of mind and reduce what you owe.

Emotional Factors Matter Too

Saving builds a sense of progress. Paying off debt relieves stress. Both matter. Choose what motivates you to stay consistent.

Speak with a Financial Coach

Everyone’s situation is different. A professional can help map the right path for you.

Final Thought: Paying off debt and saving aren’t either/or decisions. In 2025, smart Aussies do both — with strategy.

Disclaimer: This content is general in nature. Please consult a financial advisor for personalised advice.

Australian woman choosing between saving and debt repayment

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