How to Save Money While Getting Out of Debt

Money save

Getting out of debt while also saving money seems like an impossible financial achievement. But, by making smart money decisions, budgeting, and planning, you can pay off debt while also increasing your savings account or emergency fund.

Life is much easier when you feel confident about your finances. Even if you have two very different financial goals, such as saving money while paying off debt, it’s entirely doable. Keep reading to learn the tips and tricks for paying down your debt while also saving for an upcoming vacation, wedding, or some other expense.

Get the Most Out of Saving

There are many different programs you can participate in to leverage your savings potential. The best place to start is your employers’ 401(k) matching program or some other employer-sponsored program, such as loan repayment.

By taking part in these programs, you can effortlessly save money. For example, with a 401(k) matching program, your company will match a certain percentage of the funds you put into the retirement account. Most companies match anywhere between 3%-6%. This means that if you contribute 4% of your paycheck to a 401(k), your company will also put in that amount. This offers 100% growth.

By using employer-sponsored programs, you’re able to take advantage of saving for the future, namely retirement. These programs may also make you eligible for a tax credit.

Another good tip is to look for ways you can save money. Many banks and lenders offer a slight discount when you set up automatic payments. This is the prime opportunity for saving money and Get Out of Debt.

Prioritize Your Debt

If you’re like most people, you carry a variety of debt. Most people have credit card debt, a mortgage, a car loan, and student loans to pay off. So how do you choose which debt to tackle first? Prioritizing your debt is a must do.

Most people prefer to pay off their high-interest rate debt first. Credit cards and high-interest loans can make it impossible to save money, especially when you’re paying high double-digit interest rates.

Make a list of all your debt, including the creditors, monthly payment, and the interest rate. Prioritize your debt and make a plan to pay off the loan or card with the highest interest rate first.

To make more progress on high-interest rate debt, you’ll need to double up on payments. This way your secondary payment is applied directly to the principal balance and not towards interest. Once you have a debt repayment plan, stick with it!

Pay on Time & More than the Minimum

When paying off debt, there are some golden rules you’ll always want to follow in order to keep yourself in good financial standing. Be sure to always:

  • Make payments on time
  • Pay more than the minimum
  • Know which payments to double up on

But how can you live by these rules? Making payments on time is easy if you have a payment calendar to follow. You can also sign up for automatic payments which most banks and lenders offer. This way you don’t have to think twice about whether you made a payment, it will have already been made for you!

Paying the minimum is like taking one step forward and two steps back. You won’t be able to make a serious dent in your debt if you only pay the minimum balance. Figure out how much money you can afford to put towards each of your debt and stick with it. The more money you put towards debt each month, the sooner it’ll be paid off.

Have Savings Goals

Saving is already hard enough, so not having a plan or goals to work towards makes it much harder to save. In order to successfully save money by paying off debt, create a timeline for meeting your savings goals.

For example, you may have the goal of saving enough money to pay for a family vacation next year while also setting aside money for a down payment on a bigger home. Figure out which goal is more important as well as which one is easier to achieve. In this instance, it’ll take a lot less time to save up for a vacation compared to the time needed to save up for a down payment.

After setting your goals, turn them into reality. Open up a different savings account and have money automatically deducted from your paycheck to your vacation fund and your down payment fund. Even if you can only afford a little bit of money in the beginning, something is always better than nothing.

Conclusion

Having two conflicting financial goals, such as paying off debt while saving money, may seem impossible. But, with the right plan of attack, you can see your debt numbers decreasing as your savings account balance increases. Use these tips and tricks to work your way towards financial security.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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