At some stage you will want to begin saving money to cover costs that will be occurring in the future, however until you have paid off your debt that is costing you money in interest and penalties it is not wise to save money. You need to reduce and eliminate your debt thereby cutting off the drain on your income that is required to cover the interest costs and by doing so you will be gaining a lot more benefit than trying to build up a surplus of funds in your account. You will always earn less money from the interest of funds invested than it will be costing you for the interest you are paying on your debts. Because of this if you were to save money and not pay off debts it would be a backward step as it is in effect costing you the difference between the after-tax interest you could be earning on your investment money and the full amount of interest that you are paying on your debt. In addition to paying interest on your debt often you will be missing out on discounts for early payment of accounts and this is an additional 'saving' in effect that you will be losing out on by not making payments on time. The best action you can always take is to reduce debt where possible unless that debt is associated with an income earning asset or something that you will make a capital gain on over and above the expenditure that you have to make on the interest by having that debt. Once you have cleared all your debt then you can start thinking about making savings but it is not a good business decision to do that before the due time even though it might make you feel good. Eliminate your most costly debts first, the rest of your debts second and then start saving your excess funds when all else has been taken care of.
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