Pay off your debts… or save?


Steve Sprovach and Amy Wagner

Posted at 9:44 p.m. ET on June 16, 2021


Question: HG in Butler County: can you help me? I have about $ 20,000 in credit card debt and little savings. Should I focus more on paying down debt or building up my savings?

A: If it’s reassuring, others are in the same boat: three in three Americans have more credit card debt than savings, according to And while this is obviously not an ideal situation to be in, what is important is that you have recognized the problem. Now, we will help you take some steps to solve it.

First of all, you need to prioritize building an emergency fund. Why? Because life is coming. And if you don’t have one, you’ll be forced to turn to credit cards, likely perpetuating the problem. Saving a little helps. But, over time, the fund should be able to cover three to six months of expenses and it should be easily accessible (i.e. using a regular old savings account that doesn’t earn much interest is completely acceptable).

Then take advantage of a 401 (k) if you have access to it through work, especially if it offers a match. Saving enough to get the match is like having someone in the fight with you. In addition, the money deposited in retirement accounts is generally secure from creditors.

Now is the time to think about your debt. There are two different approaches: the snowball method (paying the card with the smallest payment first, while paying the minimum on everything else); or the avalanche method (tackle the card with the highest interest rate first). We recommend the Avalanche Method because it is more tax-conservative, but the Snowball Method can be beneficial if you are someone who needs to see results fast to stay motivated.

Here is Allworth’s advice: It will likely be difficult to get out of this hole, and these are just a few of the steps needed to get there. But this can be done. Just make sure that you are dedicated to doing behavioral changes too, such as paying off your credit cards in full each month. You don’t want to go through all of that hard work to find yourself where you started. Good luck!

Q: Dave from Cheviot: My dad just told me he missed his initial Medicare enrollment window (it ended in April). What should he do?

A: His options depend greatly on whether he is currently working and is covered by a qualifying group insurance plan through an employer (or a spouse’s employer). If he is, he can enroll in Medicare at any time (and up to eight months after employer coverage ends) through a special enrollment period. He will not incur any penalty.

If it isn’t, things get a bit trickier (and more expensive). His next chance to enroll won’t be until the general enrollment period which runs from January 1 to March 31 (and actual coverage won’t begin until July 1, 2022). In addition, he may be required to pay premium penalties in perpetuity. And here is an important note: it can not register during the open registration period which will take place at the end of this year – this window is only for current registrants to make changes to their plan.

Allworth’s advice is that your dad (or you) should start figuring out his options ASAP. has more information for someone in their situation, as does the online resource center of e-health.

Each week, Amy Wagner and Steve Sprovach from Allworth Financial answer your questions. If you or a friend or family member is having a money problem, please send these questions to [email protected]

Responses are for informational purposes only, and individuals should consider whether a general recommendation in these responses is appropriate for their particular situation based on investment objectives, financial situation, and needs. To the extent that a reader has questions regarding the applicability of any specific matter discussed above to their individual circumstances, they are encouraged to consult with the professional adviser of their choice, including a tax advisor and / or a lawyer. . Retirement planning services offered by Allworth Financial, an SEC-registered investment advisor. Securities offered by AW Securities, a registered broker / dealer, FINRA / SIPC member. Call 513-469-7500 or visit

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