Save or pay debt first? How to prioritize paying off student loans and credit cards

Five stacks of coins arranged by height, with a hand dropping coins into a piggy bank in the backgro...

It's an age-old question: Do you save money or pay off debt first?

Some camps emphasize paying off high-interest debt before you do anything else, while others point out it can be financially risky to put off saving until you are entirely debt-free — particularly for crucial goals like retirement.

So, who's right?

The answer isn't simple, but there are a few rules of thumb to help decide the best order of operations for your situation. Even if you've done a so-so job in the past, it's never too late to get your financial priorities straight — and start getting richer, not more deeply indebted.

Read on for expert advice on how to juggle debt payments with saving.

Take stock of your debt and how much you have in savings.

Before you choose to put extra money toward debt or savings, take stock — no, not that kind of stock — of your situation.

Do you have an emergency fund, or are you like the 46% of Americans unable to handle a $400 surprise bill?

How much debt do you have? What's the ratio of your monthly minimum debt payments to your income?

Do the math to see if that's above 36%, which can be a red flag and a sign you perhaps need loan forgivenesspostponement or extra income.

Are you on track for retirement? Experts say you should have one times your salary socked away by age 30, and two times your annual income by 35.

You can't create a plan without a holistic picture of your finances.

Rank your interest rates and be flexible as you prioritize.

It goes without saying you should avoid racking up late fees — which usually range from $15 to $35 — and letting your debt balloon. That's why you should always make at the least the minimum monthly payment on your credit card.

After that, most people should have at least $1,000 tucked away in emergency savings before making more than minimum payments, Sophia Bera, certified financial planner at Gen Y Planning, told Mic in a phone interview. 

As soon as you have at least basic savings in place, you'll likely want to return your focus to paying back any borrowed money.

After all, paying only the minimum won't stop your debt from growing or your credit score from shrinking, particularly if you have a high-interest balance on your credit cards. 

Expert tip: If you have multiple cards or loans, focus on the highest interest rates first — aka the "avalanche" method. Once those are paid down, you can start saving more and making larger payments on your lower-interest debt.

For example, a 15% APR on credit card debt is relatively high — which means paying it down should be your top priority. On the other hand, a 3% rate on your mortgage is relatively low, so putting extra money toward your retirement should result in higher returns than trying to pay off your mortgage faster.

You can also lower certain interest rates by refinancing your loans. When you refinance, you'll pay off debt faster and pay less interest.

If saving for retirement keeps getting pushed to the back burner, try to set a minimum bar for yourself: A good rule of thumb is to save at least enough for retirement to take advantage of the company match, if your employer offers one.

Remember that once you retire, you might have few options for income besides Social Security benefits — and even those can be cut down if you have unpaid federal student loans.

Tap an expert for help — or use a "savings versus debt payment" tool or calculator.

No matter your age, borrowing money weighs on your mind: Research shows debt can cause anxiety and even depression in consumers.

If you're feeling angst about your debt, don't shove aside your stresses. Get help.

That might mean plugging your numbers into a "debt versus savings" calculator to help you prioritize paying back borrowed money versus investing in retirement savings — or even opening a regular savings account.

Sometimes, though, nothing compares to a professional.

It can be hard to figure out yourself where you need to put your extra resources. A certified financial planner can clear the haze if you're still unsure or worried about mounting debt bills.

Finally, remember to take advantage of any cash infusions, like holiday bonuses, raises, tax refunds or even that $100 from Grandma.

It might feel sad not to spend it, but putting it toward debt payments is a no-brainer: Don't wait for the Ghost of Christmas Future to come tell you as much.

Likewise, if your expenses in any area go down, because — say — you negotiated a lower rent? Use the difference to bump up your debt payments.