The following content originally appeared in an article by Amy Fontinelle on Yahoo! Finance on May 4, 2016.
Pay down debt now or save:
Here's how to choose
When your liabilities include things like credit card debt or that loan you got from the furniture store to buy your couch, paying debt first can help you solve ongoing problems with managing your money.
"Not only is consumer debt high interest, but in my experience with clients, 99% of the time, consumer debt is created when lifestyle exceeds resources," says Lauren Klein, CFP® professional, the founder and president of Klein Financial Advisors in Newport Beach, California.
Identify your real expendable income, create a budget based on that number and include paying down debt as a significant part of the equation, Klein says.
Paying debt first also makes sense because you're getting a guaranteed "return" by cutting your interest payments. It's typically more than you'll earn in the stock market and definitely more than you'll earn in a savings account.