People who have a lot of debt can find it hard to save money. It doesn’t have to be though. There are several ways to save money while still paying down debt, and we’ll cover them here.
Consider a Debt Consolidation Loan
These loans lower payment amounts on credit cards. This allows you to save money while still paying down debts. To find out more, read at National Debt Relief.
Decide Which Method Works Best for Paying Down Debt
There are several strategies people can use to pay off debt: the avalanche method, the snowball method, balance transfers, personal loans, debt settlements, and bankruptcy. The method they choose depends on how much debt they have and the amount of money they have to pay.
If you have money coming in, the avalanche method, snowball method, balance transfers or are good options. People who have little or no money coming in might consider debt settlements or bankruptcy.
Make Sure You Have Enough Savings
When paying off debt, it helps to have enough savings to cover the cost-of-living expenses in case of an emergency or job loss. Use this savings calculator to figure out how much you should save to your emergency fund. Once you’ve figured that out, use the next two methods to simplify the process.
Set Up Buckets for Major Expenses
After you start working on saving, set up buckets for major expenses that may come up in the future, and assign to different expense buckets. Figure out the amount needed for each of these major expenses.
For example, if you think you’ll need a new car in a few years, divide the amount you want to spend by the amount of time you want to wait before buying a new car. The answer is the amount you’ll have to save per month to reach that savings goal. If the amount isn’t in your budget, increase the amount of time needed or lower the price point.
Automated savings is the easiest way to save money while paying off debt because it’s automatic. Set up savings accounts for each savings goal, then save the amounts you calculated automatically into those accounts from your paycheck.
Because the amounts are going into a separate account, you won’t miss them. Make it even less tempting to transfer the money to your checking account by opening the savings accounts at a different bank.
Boost Contributions To Your 401(k)
Most experts recommend saving 10 to 15% of your income towards retirement. That may work for a young person, but you may have to save more if you start for retirement when you’re older. Depending on how old you are when you start saving, you may be able to take advantage of catch-up contributions.
It is possible to save while paying down debt. Figuring out how much to pay toward different cards is the first step. Once you’ve figured that out, use the other methods to put savings on autopilot. Also, be sure to save toward other important long-term goals, like retirement.
Saving while paying down debt provides peace of mind because you’ll know that your debts are being paid down and you’re growing your savings at the same time.