Question: I’m in debt, but I also have some savings. What should I focus on first?

Advice from the Lab: Keep $1,000 in savings for emergencies, but use the rest to pay off any debt with an APR of 8%+.

If you have a mix of savings and debt, you should aim to pay off as much of your high-interest debt as possible. The interest rate on your debt is almost certainly higher than the interest rate on your savings account, so you should use most of your savings to pay off debt. 

However, it’s important to avoid new debt. Keep $1,000 in cash on hand to cover a small emergency. You don’t want a car accident or losing your wallet to force you into more debt. Use any remaining savings to pay off high-interest debt (8% APR or more.) If you don’t have $1,000 on hand, you can use Qapital to save a specific amount. Just set up a target of $1,000. 

Avoid a scarcity mindset at the end of the month by saving and paying your debt on payday.

If you only have low-interest debt (less than 8% APR), then we recommend keeping three months of expenses in savings. If you still have some money left over, use the remainder to pay off low-interest debt.