The following is my answer to a Quora
question: “Is
it more important to pay back debt, or to focus on building savings first?”
This should be done in tandem. However, if
the debt is large, and exceeds your leverage, it makes sense to pay off that debt
so as to bring it down to manageable levels, and keep it there. If you intend to pay off every single debt,
you will likely end up with no liquidity and will have no means to build up any
savings. Debt is not necessarily a bad
thing provided it is managed. Never allow debt to snowball. When it comes to savings, you are liable to
inflationary pressure and currency exposure. Make sure that you have funds in some sort of
investment that grows faster than the rate of inflation. Mere savings accounts at the bank will never
give you that.
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