Motivation: Saving vs paying down debt

It’s closing in on a year since T bought his motorbike.

There were vague plans that once he got his restricted licence and was legally allowed to ride something bigger than a 250cc, he would eventually look to scale up to something with more grunt. Loud as his CBR is, and powerful for its size, he’s still a 120kg dude.

But I think a bit of that shine, that novelty, has finally worn off. The weather is easing into another cold, wet winter. The bike is starting to require some work. That desire for an upgrade to a bigger bike is fading – and that’s patently obvious in the fact that he’s been eligible to sit his next licence for months but hasn’t got around to it.

Now he’s got another plan in the crosshairs: another car. (You might recall we’re a one-car household.) Kind of a project car – not in the sense that it will sit in rusty pieces on the lawn for years – but it will be an older, restored vehicle that’s not for everyday errands.

Bike, car, whatever. I would have obviously preferred his next big purchase to be paid for in cash. I wasn’t diametrically opposed to a loan – I was open to the idea – but saving for something major is my MO.

He’s been frustrated with his savings progress, though, because at heart, he’s a spender. And so the other day he brought this up. He thinks going the loan route will encourage him to pay it down quickly – that he’ll set up big automatic repayments that won’t leave him with much to fritter away after also accounting for living expenses.

This seems, on the face, absolutely ridiculous to me. Particularly as it pertains to T, as he has never shown any particular hurry to pay down debt before.

But I also recognise that personal finance is individual and there’s a huge psychological factor.

So what do you think? Have you ever found yourself more motivated to pay down debt than to save? Have you struggled with either?

21 thoughts on “Motivation: Saving vs paying down debt

  • Reply Sense June 5, 2012 at 23:17

    Yes, I’d be more motivated to pay down debt than to save, but only because owing money to anyone, anything, is abhorrent to me. And because my EF is fully stocked. You’ve got an animal with different stripes over there, however. For those that have no qualms about owing money, I would never recommend loans over upfront saving. The reality of not having any spending money will get old incredibly fast. It’s easy to say that you’ll do something beforehand, but to actually experience it, month in and month out? …it’s really hard. Good luck resolving this issue together–it’s likely to be one that comes up a lot, in one form or another.

  • Reply Sense June 5, 2012 at 23:18

    (I should clarify that I would never voluntarily choose a loan over saving up front, but if I found myself in a position of having to take a loan, the above answer applies.)

  • Reply Michelle June 6, 2012 at 01:21

    I’m way more motivated to pay down debt than save. I hate that though and I need to be saving more.

  • Reply Daisy June 6, 2012 at 02:40

    I’m terrible – never have I found myself motivated to pay off debt rather than save. LOL. I love saving, because I love seeing that number creep up. I hate paying down debt even though right now I have my fair share.

  • Reply Sean @ One Smart Dollar June 6, 2012 at 02:52

    I agree with Daisy, I love to save. Paying off debt should be the number one focus though

  • Reply krantcents June 6, 2012 at 04:19

    You know he can test out his thinking by setting up a savings payroll deduction now. Test it out for afew months and see how it goes. It will be a very objective test and he will find out if he can tolerate it.

  • Reply TB at BlueCollarWorkman June 6, 2012 at 04:28

    My thoughts include the following:
    (1) I was totally confused becuase you were talking in kg. So then I figured you were a Euro. But then you said something about winter coming which was super confusing. And then I realized that you’re a New Zealand person.I should’ve alrady known that stuff, but I didn’t and was royally confused. Haha.
    (2) If he wants to buy a car and “pay down the debt fast” with “super big monthly payments”, then why not do a pretend loan system right now? I mean, have him put “super big monthly payments” in an account right now and when it’s gotten up to the cost of the car, pay for the car in cash. I know that sounds like saving and he’s not good at that, but make the mentality that it’s a big monthly payment system.

  • Reply DebtsnTaxes June 6, 2012 at 05:14

    I think I am motivated by both. But I think they go hand in hand. My focus right now is on debt-paydown. But that is primarily because I want to save more in the future. If I pay our debt down now, that means I will have more to save later. Of course this only works as long as more debt isn’t taken on.

  • Reply AverageJoe June 6, 2012 at 07:00

    My gut feeling without knowing him is the debt is fueled by a “gotta have it now” feeling that spenders get around new projects/purchases.

    On your question: I feel lucky because I enjoy paying debt and saving nearly equally. Not sure why.

  • Reply Bridget June 6, 2012 at 07:02

    I don’t know, it depends on the day..

    Sometimes I get SUPER anti-debt and then I re-work all my finances and cheer because I can be debt-free in 12 months instead of 18… but then I never commit to it because I just like having money too much. I love the security of seeing a large balance in my bank account. It’s just nice to know that if I ever really needed money, it’s there — and not just my emergency fund, I have stocks I could sell or mutual funds I could liquidate if ever things got really bad. It makes me feel safe.

  • Reply Andrea @SoOverDebt June 6, 2012 at 10:08

    I’ve typically struggled with both, though as I’ve gotten my act together, I enjoy saving a lot more than paying off debt. When I send off a debt payment, I get that bummed out feeling of watching my money leave my account. When I save, though, I see the growth of my balance and it makes me want to save even more. Now that I’ve made several semi-large purchases with cash, I’m a firm believer in the value of having money put away for an emergency or just something I want.

  • Reply From Shopping to Saving June 6, 2012 at 10:14

    Another thought-provoking post! I swear I say that every time I comment 🙂 It’s a good thing!

    T sounds like my BF. BF had a yamaha r6 for a few years when he turned 25. He bought it with loan money. After the shininess wore off and it had to be maintained and repaired..he sold it. Was it worth it? Probably not. But since it was his money and his decision, and we weren’t even together at the time… then I can’t judge him for what he did. It would totally be different if he made a big purchase like that right now though. I can see where you’re coming from since you would never do something like that, and I respect you for thinking that he is his own person and he is allowed to handle his personal finance differently than you. If it were me, I would be screaming and possibly begging him not to do it. That’s just me! I would rather save for something especially for a large purchase, if I could avoid a high monthly payment. But sometimes people just have to learn on their own. Has he ever financed something before? Does he have any other loans? I’m looking forward to what his decision will be.

  • Reply 6400 Personal Finance June 6, 2012 at 10:38

    Regardless of what his psychological approach to money is taking on debt to finance a liability is never a good idea. Its about math, not feelings. If he really wants it then he should do as previous commenters have said and save up for it.

  • Reply Revanche June 6, 2012 at 18:41

    I’m exactly motivated the same: paying it down or saving it up. But if I have debt, it’s going to get paid down first with only a little held back to save cash for emergencies unless I have an interest free way to cover them.

  • Reply John | Married (with Debt) June 7, 2012 at 08:26

    I’ve never struggled with saving because I’ve had too much debt. I’m hoping that I am more intense about paying off debt than saving, because I don’t want to be amped up at level 10 for the rest of my life.

  • Reply Miss T (@prairieecothrif) June 7, 2012 at 09:59

    That is a tough call. I can say I have struggled with both. I actually like the relief feeling I get when I see the debt number reduce. It is a real great feeling knowing you are one more step closer to getting rid of it.

  • Reply nicoleandmaggie June 7, 2012 at 12:30

    Development economists have done some research on these questions… what’s really interesting is that in India, some people choose high interest short term debt over lower interest longer-term debt because the high interest short term spurs them to pay it off sooner.

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