Financial hurdles sometimes happen out of the blue. Different financial constraints can pop up suddenly even when you think you have things under control—job loss, medical bills, mortgage payments, car repairs, etc. Having a nest egg that you can turn to when unexpected expenses arise is vital.
Saving money is difficult, especially if you need to pay your credit card debts and loans. But while everyone has a unique financial situation, saving and paying debts simultaneously is possible.
Here are some ways to help you settle your debt and save money in no time:
1. Have Clear Savings Goals
A clear savings goal is important if you want to save money while paying off your debt. You could start by setting a specific amount to aim for, and then research different savings options available to you. It might not seem important at first, but understanding high yield savings and other types can help you establish a financial road map that will keep you on the right track.
As you work toward saving the amount you set, you can build better financial habits that will help you manage your debt more effectively. For example, if you have credit card debt, you can make minimum payments regularly to stay on top of it and avoid having to pay late fees. By taking strategic approaches to saving and debt repayment, you’ll be able to reach a better financial standing in due time.
2. Budget Your Income Wisely
To save money and ensure you still have enough to gradually pay your debt, you should also learn to allocate your resources wisely. Have a budget in place and stick to it no matter what. Do this by listing your annual and monthly financial obligations, including:
- Debt repayments
The more comprehensive your list is, the better. When done, plan your expenses over the next few months. Calculate how much you would have to spend on your essentials, then deduct the total from your yearly take-home pay.
Depending on your situation and the amount of money left over, you can set some aside for your debt repayments and savings.
3. Avoid Unnecessary Spending
If you evaluate your expenses, you might find some things that you could cut down on or remove entirely. These include eating out when you have enough food at home or buying new gadgets when the old ones are still working fine. You need to be aware of such expenses so you know which unnecessary costs you can let go of. Then you can use that money for something more beneficial, such as adding it to your savings goal or settling your debt.
You don’t need to deprive yourself of your wants or needs entirely; you can still set aside some cash to enjoy the fruits of your labor. Just make sure you do it without going beyond your means.
One way you can do this is by having a list ready every time you shop. If you stick to what’s on the list and resist the urge to add more items, you can stay within budget and have enough money left over for your savings and debt repayment.
4. Create An Emergency Fund
Now’s the perfect time to put up an emergency fund if you haven’t already. Even with debt to pay off, having an emergency fund is a crucial and sensible step towards financial stability. After all, you don’t want a financial crisis eating up your entire income.
A typical emergency fund should cover at least three months’ worth of expenses. To build one, kick off with modest daily goals and gradually ramp them up. Your savings target will hinge on your personal expenses and income.
A nifty way to boost your emergency fund is by squirreling away any surprise income. This windfall could come in various forms, like:
- Tax refunds
- Cash gifts
- Contest winnings
The more you stash away in your emergency fund, the longer you’ll stay afloat in tough times. Plus, it’ll grant you peace of mind, knowing you’ve got a financial cushion for those unexpected expenses.
5. Consider Debt Consolidation
Juggling debts can be a real headache, especially when you’re grappling with multiple loans. But don’t fret, there are options to consider, like debt consolidation. This means taking out a new loan to pay off all your existing ones.
Rolling multiple loans into a single, larger loan can snag you better payoff terms, save you some dough, and keep things organized—especially if you’re saddled with various high-interest debts.
Loads of financial institutions, from traditional banks to private lenders, dish out debt consolidation loans. But bear in mind, not all of them are created equal.
Before diving into one of these loans, take the time to wrap your head around how it works and weigh up the pros and cons. Doing so will help you figure out if it’s the right financial move for your current situation.
6, Try The Debt Snowball Strategy
The debt snowball strategy is another nifty solution to consider when you’re juggling saving and debt repayment. This approach zeroes in on small wins, giving you that sweet sense of accomplishment. The trick is to knock off the tiniest debt first while keeping up with minimum payments on your other debts.
To get rolling with the snowball strategy, follow these handy tips:
- Whip up a list of all your debts
- Keep making those on-time payments
- Zero in on wiping out small debts
- Rinse and repeat until you’ve crushed all your outstanding debts
When done right, the debt snowball method can be a top-notch way to break free from debt. But keep in mind, everyone’s financial situation is unique. So don’t be afraid to tinker with different tactics until you’ve paid off your debt and saved a nice chunk of change.
7. Set Your Savings On Autopilot
Pulling off a plan to save money and tackle debt at the same time hinges on your ability to stick with it. To make life easier, you can automate the flow of your cash.
To kick things off, follow these steps:
- Figure out how much money you need to set aside for savings.
- Automatically funnel any extra cash straight into your account.
- Set up auto payments to regularly chip away at your debts.
Nailing these steps will help you knock out your debt like a pro. Plus, with the cash out of sight in your checking account, you’ll be way less tempted to splurge.
8. Make Extra Payments Whenever You Can
Consider making extra payments when paying off some of your debts. It may help reduce the future interest costs of your loans and shorten the term. But be sure to inform your lender about making extra payments before you do this. Some may not allow you to make extra payments, since lenders earn money by charging interest.
There may even be instances when lenders have a prepayment penalty. This means you’ll be penalized to compensate the lender for lost interest. Keep that in mind when weighing your options.
Paying off debt and saving money can be tough, but it’s totally doable. All it takes is tweaking your lifestyle a bit and experimenting with different approaches until you’re debt-free. The secret is cooking up a strategy that suits your financial situation. Plan it out, stay the course, and before you know it, you’ll be hitting those financial goals like a champ.