With today's job market on less-than-solid ground and a recession mentality gripping households around the country, many families under financial strain wonder if it's more important to pay off debts or build up a rainy day fund.

"If you are saving money, you have options," said P.J. DiNuzzo, president of DiNuzzo Investment Advisors Inc. in Beaver. "If you pay the debt off, you are out of options. But you can never go wrong paying off debt. The nicest house on the block is the one paid off free and clear."

The unfolding crisis on Wall Street has been a wake-up call for families who, like many of the big financial institutions that recently crashed, took on too much debt to finance their lifestyles.

Without savings and with less home equity to fall back on, American households are struggling with high consumer debt and a rising cost of living while trying to repair or improve their personal balance sheets.

"Generally speaking, if people have high consumer debt, they really should focus on getting rid of that," said Eric Tyson, author of "Personal Finance For Dummies." One exception, he said, "is if someone has so much debt they may declare bankruptcy, they would do better to hold onto their cash."

Also if someone is in a job where there's a higher risk of job loss, they might be better off conserving the cash. "If you'll be out of work, you need cash for other purposes such as paying the mortgage and putting food on the table," Mr. Tyson said.

Mathematically, however, it usually makes more sense to pay off high interest debt rather than save money because if the money is in the bank earning about 3 percent while the debt is costing around 15 percent it's a losing proposition to save money.

Also, paying off a debt that is costing 15 percent is the same as earning a 15 percent return tax-free and risk-free, which is pretty difficult to do in this market.

In the most extreme situations, some financial professionals would even suggest taking small amounts of money out of IRAs or 401(k)s to get debt under control.

But the question of whether to save or pay off debt is arguably one of the most frequently encountered dilemmas in personal finance. There is no right or wrong answer because it depends on the type of debt a person has, how large it is and whether or not their choice allows them to sleep well at night.

"What we have learned is you can't rely on the experts," said Robert Shemin, a former adviser at Goldman Sachs and author of the book "How Come That Idiot's Rich and I'm Not?" "You have to educate yourself. Look at all the [professional] money managers who have performed horribly.

"You have to know and manage your risk for your home and business every month. Know what's coming in and going out and have a cushion of six months to a year of available cash in a safe bank account or money market so you can weather these kinds of storms."

The stock market plunge has taken a toll on retirement savings in recent weeks and job losses continue to mount across the country.

Slightly more than 750,000 jobs have been lost nationwide since the start of the year and the rate of losses increased from an average of 75,000 a month in the first eight months of the year to 159,000 in September. While unemployment in Pennsylvania was up by 31,000 residents in the month of August, employment figures improved by 5,000 residents in September, according to the Pennsylvania Department of Labor & Industry.

Although Pennsylvania's unemployment rate has remained below the national rate, the growing concern is that more families with no savings are only a few missed paychecks away from financial ruin.

Kristen Garrett, a spokeswoman for Advantage Credit Counseling Service on the South Side, said the service encourages clients to have an emergency fund of at least $500, but often when counselors talk to clients about saving, the term itself scares many of them.

"Some of the people we see are maxed out on credit and don't have a cushion," she said. "If they are in a situation where their car needs brakes or the hot water heater breaks down, they need that emergency fund.

"What we are seeing is a lot of people coming to us are definitely more under water. They have more debt than they used to. A key indicator is the number of people coming to us for bankruptcy. They outweigh the number coming for credit counseling."

Credit card debt can have a significant impact on a person's FICO score, which affects how lenders determine credit-worthiness.

One important factor in the FICO score is credit card utilization, which is the amount of credit card debt a person has vs. their total credit limit. Consumers who use extra cash to pay off their credit card debt may improve their FICO scores, qualifying them for better rates on home and auto loans.

"One of the things happening currently with the financial crisis is card companies are taking folks whose scores are not as high as they'd like and lowering their credit limits," said Barry Paperno, consumer operations manager for Fair Issac Corp., creator of the FICO score.

"If they do that, it could raise your utilization percentage and affect your score. Then you get into a snowball effect when other credit card companies see your score went down and they'll lower your limit with them. This is all the result of having a higher-than-optimal debt load."

While that can be a good argument for paying down debt instead of saving money, Liz Pulliam Weston, a columnist for MSN and author of "Easy Money," said she is not a fan of paying off mortgages and student loan debt even in less turbulent financial times.

"It's usually low-rate and [tax] deductible debt, and most people have better things to do with their money," she said. "In times like these, it's very important to have a fat savings cushion in case you lose your job or have another setback.

"If you don't already have that and have been making extra payments on low-rate debt, I'd change it up and put the money into savings. Credit card debt is another story. It's better to pay credit card debt because it's expensive, and lenders can change the terms on you."

There are, however, some exceptions.

If a person loses their job and wants to conserve their cash, they should make only the minimum payments on all their debt, Ms. Weston said, adding that if they are having trouble making payments they should see a legitimate credit counselor and a bankruptcy attorney.

"If you keep trying to pay the debt when you cannot, you might be throwing good money after bad," Ms. Weston said. "If your [home equity] line of credit has been frozen you might not want to accelerate paying it down because you won't have access to the credit you've freed up in an emergency."