How to Start Saving When You’re in Debt

How to Start Saving When You’re in Debt

A realistic guide to building financial security even when you owe money

Most people believe they have to choose between paying off debt or saving money. The idea of doing both can feel like juggling fire with one hand tied behind your back. However, life rarely waits until your finances are perfect, and emergencies do not ask whether your credit card is maxed out before arriving. The truth is, saving while in debt is not only possible but necessary. It is about striking a balance, creating momentum, and protecting your future.

In this guide, you will learn how to start saving money without abandoning your debt repayment plan. More importantly, you will discover how doing both at the same time can change the way you view and manage your finances for life.

Why Saving While in Debt Matters

When you're in debt, it can feel like you are digging yourself out of a hole only for the walls to cave in again. Emergencies, surprise expenses, and even small lifestyle splurges can send your progress tumbling back down. Having savings, even a modest amount, offers a cushion. It prevents you from falling deeper into the debt trap every time something unexpected happens.

Savings give you breathing room. They offer dignity and peace of mind. They are proof that your financial decisions are no longer reactive, but intentional.

Step 1: Get Honest About Your Situation

Before you begin saving, you need a clear picture of what you are working with. This means listing all your debts – not just the big ones you remember off the top of your head. Include everything: credit cards, student loans, payday loans, car finance, or money you owe friends and family.

Then, take an honest look at your income and expenses. How much comes in, and where does it all go? For many, this is the moment where everything becomes real. But that awareness is what gives you power. You cannot change what you do not see.

Step 2: Create a Minimum Emergency Fund

You do not need thousands to get started. A small emergency fund of even £250 to £500 can make a huge difference. It is not about having enough to solve every problem, but enough to cover those everyday mini-crises – a burst pipe, a car repair, or a sudden bill.

This fund becomes your financial shield. It is what keeps you from reaching for a credit card every time life throws a punch. Start small, but start now. Even putting aside £5 or £10 a week makes a difference. The key is consistency.

Step 3: Prioritise High-Interest Debt

Once your mini emergency fund is in place, turn your attention back to the debts that cost you the most. High-interest debt, especially from credit cards or payday lenders, can drain your finances faster than you realise. Focus on paying these down aggressively while continuing to make minimum payments on all others.

You can try the avalanche method, which targets high-interest balances first, or the snowball method, which starts with the smallest balances. The method you choose matters less than your commitment to stick with it. Choose what keeps you motivated.

Step 4: Automate Your Savings

It might sound odd to start automating savings when you are already juggling payments. However, automating small, regular deposits – even as little as £10 a week – helps remove the emotional tug-of-war that comes with deciding whether to save or spend.

Set up a separate savings account and schedule a weekly or bi-weekly transfer, ideally timed right after payday. When saving becomes routine, you no longer have to rely on willpower or good intentions.

Step 5: Cut Costs Without Cutting Joy

You do not need to strip your life of all pleasure to save money. Look for wasteful spending rather than meaningful spending. Cancel subscriptions you forgot you had. Swap takeaways for home-cooked favourites a few nights a week. Use your library instead of buying new books. Look for quality over quantity.

The goal is not to live in deprivation. It is to free up money that serves your goals instead of stealing from them.

Step 6: Track Your Progress and Celebrate Wins

Debt repayment and saving can feel slow, especially when you’re doing both. That is why it is important to track your progress. Each pound saved or paid off is a victory. Celebrate small wins. Did you hit your £250 savings target? That is cause for a reward – not one that breaks the bank, but one that acknowledges your effort.

Progress is powerful. It fuels motivation. It reminds you that change is happening, even when it feels slow.

Step 7: Build a Mindset of Enough

One of the most damaging myths about money is that we will start saving or living better once we earn more. But waiting for the perfect moment delays growth. There will always be expenses. There will always be something else you could buy.

Learning to say, “What I have is enough for today,” builds resilience. It helps you make intentional choices. It anchors you in reality and keeps you from spiralling into comparison or shame.

Step 8: Prepare for Future You

Once you’ve gained momentum with small savings and made progress on your debt, start thinking long-term. What will life look like one year from now if you continue? What about five years? Future you will thank you for every small step you took today.

Consider setting up sinking funds – savings pots for specific future expenses like holidays, car repairs, or Christmas. These help spread costs out over time and reduce the likelihood of falling back into debt.

Step 9: Forgive Your Financial Mistakes

Debt often comes with shame. People carry guilt for past purchases, loans they took out in desperation, or years of financial chaos. But shame keeps you stuck. It holds you in the past.

The real courage is in facing your financial truth without judgment. Your past does not define you. What matters is what you do now, with what you have. Start where you are, and grow from there.

Step 10: Know This Journey is Not Linear

You will have setbacks. A missed payment. A month where you save nothing. A sudden expense that knocks you back. These moments do not mean failure. They are part of the process.

The journey to financial stability is not a straight line. It twists, loops, and doubles back. What matters is that you keep walking. Progress, not perfection, is the goal.

Final Thoughts

Saving money while in debt might seem contradictory, even impossible. But with small, consistent actions, you can build a safety net while climbing out of financial struggle. It is not about choosing one over the other. It is about building both, in balance, at a pace that works for your life.

Your relationship with money is one of the longest relationships you will ever have. Make it a kind one. Make it honest. And most of all, make it yours.