Can I save while also paying off debt?

My goal for the new year is to start tackling my debt, but I also want to save for a deposit on a house. Is it better to start by paying off all my debt first (I have a bank loan, credit card and clothing account), or can I start to save simultaneously – albeit a much smaller amount as I will not have much disposable income while clearing my debt?

Name withheld

Dulcie Weyks, Financial Adviser, PSG Wealth, Waterkloof, responds: Congratulations with this bold decision to take control of your financial wellness.

If the interest charged on debt is higher than the interest you can earn on savings, it is best to first pay off your debt. Review your statements and term agreements to find out how much interest you are charged.

You mentioned that you have a bank loan, credit card and clothing account. Based on the average rates for common types of debt, the interest charged on your credit card is likely the highest.

I suggest you start with a budget to assess how much surplus you have monthly to allocate towards paying off your credit card first. Consider channelling a small amount monthly towards an emergency savings fund to prevent you from having to use the credit card again for unforeseen expenses. If you are eligible to receive an annual bonus, try to put as much of this as possible towards your debt.

I would boost the emergency fund with a portion of the bonus. Once the credit card is paid off, channel this payment towards your next most expensive debt, likely the bank loan.

An advantage of getting rid of your debt is that it will improve your debt-to-income ratio and your credit score when you apply for a future home loan.

A registered financial adviser will be able to assist you with this. Good luck and remember, it does not matter how slowly you go as long as you do not stop.