Save, or pay down debt?

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Story Published: Nov 2, 2009 at 10:20 AM PDT

By Herb Weisbaum

It's a common question these days: is my first priority paying down debt, or putting some money aside for savings?

The answer: try to do both.

"Don't focus on debt repayment or saving to the exclusion of the other," says Greg McBride, senior financial analyst at bankrate.com. "It's important to do booth at the same time."

McBride says the biggest barrier to saving is not being in the habit.

"If you're living paycheck to paycheck, the starting point is track your monthly spending for a few months. Until you have an honest assessment of where your money's going, you don't know where you can cut back," he says.

"Discipline yourself to reign in expenses so you can throw extra money towards your debt and get that paid down as quickly as possible."

Then you want to force yourself to pay yourself -- first.

"So put our savings on auto pilot by having money directly deposited either from your paycheck or your checking account into a high-yield savings account."

McBride says you should prioritize the debt you repay -- starting with the highest interest rate. That will get your out of debt sooner.

For more information

Should you pay debt before saving?

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