Your debt repayment fund will set the pace of your journey towards debt freedom. If you have a lot of money in this fund, you can quickly reduce what you owe. Your debt relief journey will be fast. But if you barely have enough money in this fund, you are most likely paying only the minimum requirement. If you stick to this payment method, it will take you a long time to pay off what you owe. In case you mostly have credit card debts, it gets even worse. The high-interest rate it will take you a lifetime to completely get out of debt. Your progress will be very slow and there is a high chance that you will start to feel frustrated and lose your motivation to continue.
If you look at the news, it seems like a lot of consumers have gone out to accumulate a lot of debts once more. By the end of 2019, the household debt reached a staggering $14 trillion. Among the debts that increased included credit cards, student loans, and mortgages.
The same report revealed that Americans seem to be more confident when it comes to paying off their debts. However, this does not remove the fact that you still need to pay off your debts. Until you have paid it all off, you will never maximize the potential of your finances to grow.
How to build your debt repayment fund fast
It seems like the key to improve your finances is to get rid of debt. To do that, you need to focus on building your debt repayment fund – and to do it fast. The earlier you can pay it all off, the better it will be for your financial future.
So what can you do to build this fund as fast as you can?
Update your budget plan
First of all, you have to update your budget plan. Having a working budget can make your debt relief easier. If you do not have a budget yet, then it is time for you to create one. This plan should reflect your current net income and your expenses. The expenses should be lower than your income. Finally, you need to make sure that your debt repayment fund is included in the list of expenses. Try to add it in while still keeping the total expenses lower than what you earn. If you have to, cut back on some expenses. In fact, if you want to build your debt repayment fund quickly, this might be just what you need. This extra money will also serve as your emergency cash for unexpected expenses. That way, you do not have to rely on debt to get you out of a tight spot.
Have a savings plan
Another thing that you can do is to come up with a separate savings plan. You want to increase your debt repayment fund, right? Then you need to plan how you will do it. This plan will guide you through every dollar that you have to put aside after your paycheck comes in. It will make things easier to stick to your savings and see it until completion. Just make sure that this plan is aligned with your monthly budget to make it effective.
Track your expenses
Once you have your plans in place. It is important to follow through with them all. This means you need to be more vigilant with how you spend your money. Track every expense that you make. You have to see to it that you are only spending on what is according to your budget plan. While you are still paying off your debts, every expense you make should count. Any amount that you waste on unnecessary expenses could have been used to add to your debt repayment fund. So make sure you keep your priorities in check. For now, it should be your debt payments.
This is probably the most proactive of all the things that you can do to save more for your debt repayment fund. You should try to earn more money. One survey revealed that 58% of respondents admitted that they need to make more money to get out of debt faster. The others said their budget will and controlled spending will play a role. But most of them believe that this is the option that will really make it go faster.
Opting to earn more to grow your debt repayment fund has its benefits. For one, the growth will be as much as you are willing to work for. The more you work, the more you will earn and the higher the addition to the repayment fund.
Expenses to give up to grow your debt repayment fund
Of course, earning more is beneficial but there are also advantages to cutting back on expenses. You cannot deny that it is one of the key strategies to pay off your debts fast. Although what you can cut back is limited, it teaches you a lot of things. One of the most important is how to control your spending urges. This is the root cause of your debts. It all boils down to how responsible you are with your spending.
So to practice, you can start cutting back on what you spend. Since this will also help you grow your debt repayment fund, you will be hitting two birds with one stone.
Eat at home
You might be surprised by how much you will save by opting to eat at home. You might be able to cut your food budget by half. So take some time to plan your meals and do the groceries. A bit of planning and prepping over the weekend will help make weekday meals less of a burden to make. It will be healthier too.
Bring food to work
When you make meals at home, do it in bulk. That way, you have leftovers to bring to work the next day. It will save you from having to spend money on eating out for lunch. You don’t even have to leave the office. You can just eat your lunch in your area and then take a power nap right after. It will make you feel energized to take on the tasks for the rest of the day.
Cancel subscriptions and memberships
Gym memberships and cable subscriptions may seem like an unnecessary expense at this point. You might want to just cancel these and use the money to grow your debt repayment fund instead. If you have an Internet connection, the cable subscription is no longer needed. And for the gym membership – well you can do the exercises at home.
Keep yourself healthy
Prevention is one of the indirect ways that you can save money. Health care costs are quite expensive. So one way to save money is to cut back on medical expenses. To do this, you need to keep yourself healthy. Eat the right food and exercise daily. Get enough sleep and keep a positive outlook on life. Living a healthy life will make you feel better despite your current debt situation.
Postpone buying new stuff
If you don’t need it, don’t buy it. This is for clothes, accessories, shoes, bags, and even your kids’ toys. Don’t worry because this is only temporary. Once you have gotten your debts under control, you can start buying new stuff again. But this time, make sure that you stay smart about it. If it is not needed, then just refrain from buying. Opt to use the money to save or invest instead. If you really have to buy, see if it is okay to buy used.