The average millennial carries more college debt than any other generation before, but debt and other financial problems aren’t just limited to millennials. According to a recent poll, 40 percent of Americans don’t have the means to pay an unexpected $ 400 bill.

After you’ve tried typical belt tightening advice like skipping Starbucks or eating less, read on to find out how you can use your savings to balance your debt and live a more comfortable life.

Get out of debt

Many people are forced to start their financial journey with high debts through student loans: Around 54 percent of students have to take out loans to cover their training costs. But with careful financial planning, you can pay off your debts and increase your savings.

There are several different financial approaches that people use including debt consolidation, freelancing for an extra income on the side, and even investing. Choosing the right approach will depend on your income, goals, and the amount you want to save or withdraw.

When should you prioritize savings?

One of the main reasons people should make increasing their savings a priority is when they don’t have an adequate emergency fund to raise in the event of a disaster. Some emergencies that could lead to even more debt include car repairs, emergency medical treatment, or unexpected job loss. Experts recommend having funds available just in case to pay for the saved expenses for at least three to six months.

Another reason for choosing saving over paying off debt is because of the low interest rates on your loans. Take a look at how much interest you accrue annually on your loans. When you have single-digit interest loans, it can make sense to prioritize building your savings. The idea with this is that if your interest rate is lower, your loan amount won’t change too much, which means that the time it takes to build your savings won’t have too much of an impact on your creditworthiness either.

A comfortable future retirement is another important reason. If you have not yet started saving for this scenario, it is important that you put some reserve aside each month, be it in a 401 (k) or an individual retirement (IRA) account. The sooner you start saving for retirement, the more returns you will get over the long term. Investing doesn’t seem to be in your best interest if you haven’t saved up or if you have large debts to pay off. However, if your company offers 401 (k) matching benefits, you are missing out on free money for not taking advantage of these programs.

When to prioritize debt settlement

Debt settlement makes sense when the interest rates on your loans are high. In the US, total debt is approaching $ 14 trillion. If your interest rates are in the double digits on money you owe, you may want to prioritize paying off your debt. With a high interest rate, you could be paying much more over a longer period of time if you don’t make significant payments on a regular basis.

And repaying a loan in full is always in your best interests, even if your interest rate is low but your minimum payment is high. By repaying this type of loan, you will free up a significant amount of income that can be used for saving and investing and more than you could possibly could if you were to try to pay off a loan and save at the same time.

A major benefit of early loan repayment can have an immediate positive impact on your creditworthiness. If your score is holding you back, repaying credit can improve your score so you can take other steps to build your credit, such as building your credit. Even the simple repayment of a loan or credit card debt can have a positive effect on your score. Note, however: some types of credit may have penalties for early repayment, so read the fine print.

Master the art of balancing savings and debts

If you haven’t figured out how to make money while you sleep, the art of balancing debt and savings is an important lesson. Even the most frugal donors will run into financial problems at some point. It is advisable to save some money for emergencies so that you do not go into further debt and have more peace of mind. The key is figuring out what your priorities and goals are so that you can use these tips to create a financial plan and move on from there.