3 Ways You Can Save While Repaying Your Debt

Do I save or do I pay off my debts? This is an age old question. Often people think that these options are mutually exclusive and many Americans focus solely on repaying their debt, placing less emphasis on having savings. In fact, Americans are saving less as the years go on, with an average American saving only 3.8 percent of their disposable income in 2017. If you are one of the thousands struggling with debt but wanting to save, check out these simple tips.

1. Make A Game Plan

There are different methods of repaying your debt and one method does not suit all. You can choose the debt snowball method and begin by repaying your smallest debt first. Conversely, you can focus on those debts with the highest interest charges attached to it and get rid of those first. Whatever method you choose, be sure to take the time to take into account your own personal circumstances. Once the decision has been made, it is a great idea to set up a game plan on how much you will save each month and how much you will pay off in debt. Targets are great for this and can be set annually or monthly. The ratio split between savings and debt repayment is up to you and is influenced by your savings targets and debt position. Make use of the resources available online including debt worksheets and organisation calendars. Having a visual of your target and a countdown can be extremely effective.

2. Explore Refinancing

Refinancing or consolidating your debt may sound scary but in reality can save you a lot of money in interest charges. If you’re struggling with various credit cards repayments, consider whether a payoff loan is right for you. AAA Credit Guide researches Payoff.com and the benefits it can have, one of which is that your loan is most likely to come with a lower interest rate than your current credit cards. Most credit cards can carry an interest rate of over 19 percent. With lower interest rates rates and one streamlined payment each month, you can save a good chunk of money every month.

3. Make it Automatic

Make the effort to put aside some money each month or week towards your savings and retirement. One good idea is setting up a direct debit at the end of each month when your paycheck is paid into your account. Do this once you have worked out your bills and set a budget. By automatically having this money transferred into a savings account, you won’t be tempted to spend it and before you know it, it won’t be missed. It can be any standard amount each month, even that spare $10 normally spent on coffees.

Be sure to continue contributing towards your retirement by investing a set percentage of your income towards an investment portfolio or 401 k. This is another form of saving, putting away money for when your career ends and ensuring you have a future stream of income.

With more people carrying debt, the ever arising question is how do they manage it and still achieve their goals such as owning a home outright. If you are looking to bump up your savings and get rid of your debts, budgeting tools available are your best friends. Getting the balance right between repaying debts and savings is important and depends on your own personal situation. Start out slow and build an emergency savings fund, while paying the minimum on your debts due. Do this to protect yourself in the event of income disruption or those unplanned expenses that we all know can pop up. If you still find that your income is lacking, there are many options to earn extra cash available. Small adjustments like this will surely get you on your way to being financially comfortable and debt free in no time.