You can build additional savings while you’re in the middle of paying off your debts. It seems hard, but it can be done. You just have to be really determined to do it. Because paying off your debts is not an overnight thing. And you can bet that along the way, things will happen that’ll keep you from completing the task before you.
So if paying off your debt is hard, imagine having to save money while you’re doing it. As mentioned, it’s not impossible to do. But you have to be prepared to work hard for it. Because if you can get those extra savings, you can use them to improve your finances despite going through hard times.
Of course, the big question is, how? We know that it’s going to be challenging. But there are ways to ensure that you can build additional savings successfully even while you’re in the midst of paying off everything that you owe.
How to build additional savings
There are specific tasks that you can do to help you build enough savings that’ll secure your future. If you can follow these tips, it’ll be easier for you to meet both saving and debt payment goals.
There are 3 things that you can do to make this happen.
Increase monthly income
You need funds to be able to build additional savings and pay off every single debt at the same time. This is why you need to find a way to increase your monthly income. Otherwise, where do you think you’ll get the money to meet both requirements? You’ll have to cut back on your expenses. We all know that although it will help, cutting back on expenses will only result in limited funds.
This is why it’s more ideal to increase your income. Fortunately, there are several side hustles that you can do. A huge part of your options is found online. This is actually very ideal, considering the pandemic and the increasing unemployment rate in the country. In one survey, it’s revealed that there are 2 million more freelancers who started their online careers in the past 12 months. You can join them if you want to increase your income to save and pay off your debts at the same time.
If you think your skills are not applicable online, that’s okay. Take a look at your strengths. What are you really good at? Maybe you can capitalize on that. Use your skills and create something that you can sell. If you’re great in the kitchen, you can sell something you baked or cooked. Anything that you earn can be used to increase your savings and pay off your debts.
Live below your means
Another way you can save and pay your debts at the same time is to live below your means. Don’t just live within your means. You have to make sure that whatever you’re spending is way below your means. The less you spend, the more extra money you’ll get to build additional savings without compromising your monthly debt payments.
How can you do it? You just have to consider the expenses that are important to you. Focus on that. Pay only for the priority expenses that you have identified. Nothing more. You can even consider downsizing your lifestyle. Live in a smaller house or sell off some of your possessions. If anything makes you spend more, try to get rid of it so you can live below your means.
If anything, this will teach you to become a smart spender. You’ll have to think twice before you use your finances. Because you know that it’s more important for you to save money or pay off your debts.
Turn it into a habit
While you are trying to build additional savings, learn how to make it a habit. When it has become a habit, it’ll come naturally to you. That means you’ll always find a way to increase your savings. When you can save naturally, every time there’s a chance, you’ll save money. This is a good financial habit to have. It’ll make you cautious about how you use your money. Which is a good thing if you’re trying to reach a lot of financial goals.
Making a habit of saving will steer you to make the right decisions. Soon, this habit will lead you to develop other good habits that’ll help you reach your goals. Like if you really need to pay off your debts and save at the same time. It’ll be easier as long as you have the right habits to help you do it.
What 2020 taught us about additional savings
We all witnessed how incredibly challenging 2020 was. The pandemic shook us to the core and completely overturned everything that we thought was normal. Not to mention the fact that we’ve slipped into recession shortly after. While the recession was bound to happen anyway, our economy was able to hold out and delay it. But once the pandemic happened, it could no longer be avoided.
Without a doubt, the 2 catastrophic events brought a lot of us to our knees. Although it’s a year that most of us would like to forget, you have to admit. It also brought a lot of lessons. Specifically when it comes to our ability to build additional savings.
What are the realizations that you should take from 2020?
Having an emergency fund is a lifesaver
Let’s start with emergency funds. We all realized how important it is to have an emergency fund. When people started losing their jobs or accumulated a huge amount of debt, it was emergency funds that got some households through. The back-to-back events brought about by the pandemic and recession shredded the financial security of Americans. And this was for those who had an emergency fund. Imagine what happened to those who didn’t have this fund?
This is why you need to build additional savings so you can strengthen your emergency fund. Even if you are in the midst of paying off your debts, you have to find a way to increase your savings. You’ll never know when another disaster will strike. You should secure your finances through an emergency fund.
Preparation can beat debt and any crisis
When you understand the importance of having an emergency fund, you’ll realize just how true this is. Preparation can really beat any debt and crisis. While 46 million Americans said they’ve depleted their emergency savings, they’re probably thankful that they have the emergency funds, to begin with.
But having emergency funds is not the only way you can prepare your finances. You can also find a way to make your income more secure. How? By setting up multiple sources of income. The more you have, the less you have to worry in case you lose your primary job. And if you can set up a passive source of income, it’ll make things better. You won’t have to worry about working too hard to increase your monthly cash flow.