It is not impossible to save more money while you are in the midst of a debt consolidation program. If you look at the current statistics, it seems like two of the most important financial tasks that we should be working on includes saving and paying off debt. Of course, doing both is quite difficult to accomplish. And if you have to make a choice, experts believe that it is more logical to focus on paying off your credit accounts first. After all, the interest rate of debts is higher than what a traditional savings account will earn. So if you think about it, you are actually saving money if you prioritize your debt payments.
While it may be logical to pay off your debt first, that does not mean Americans do not need to save more money. According to statistics, 4 out of 10 Americans cannot even cover a $400 unexpected expense. It is revealed in the same study that people usually look for funds by selling some of their stuff or borrowing money. That means your lack of savings can also lead you into more debt.
That is the dilemma that some people have to face. At least, this is true for those who do not have sufficient emergency funds. They need to make sure they do not falter in paying off their debts. At the same time, they have to ensure that they have enough savings to keep themselves from being forced to borrow money after an unexpected situation.
Tips to save more money while paying off debts
Fortunately, there are tips that you can follow to help you save more money without compromising your debt payments. If you implement these in your life, you do not have to choose between the two. You can save and pay off your debts at the same time. And you can be equally successful at both.
Here are the things that you need to do.
Reevaluate your budget plan
It is always safest to start with your budget plan. There are a lot of budgeting tips that you need to follow to make any debt relief program successful. But before you can do that, you might want to check what your current budget plan looks like. Sometimes, people end up following a plan that is no longer updated. Your budget plan may have been okay a couple of years ago. But life can change quickly and significantly. That means your priorities change as well. You may be spending on something that is no longer important. You need to review how much you are earning and where that money is going. The goal is to find room in your budget to pay for debts and save more money at the same time.
Cut back on unnecessary spending
As you look at your budget plan, you need to focus on any unnecessary spending that you are making. If you want to succeed at paying off your debts and saving, these have to go. Maybe you are spending too much on eating out when you can plan your meals ahead and cook from scratch at home. Or maybe, you are spending too much on things that used to be important before but not anymore. Take some time to really ponder on the importance of some of your expenses. If you can survive without some of them, just let it go. Anyway, it will only be temporary. Once you get out of debt or you have reached your saving goal, you can probably go back to spending on them again.
Set saving goals
Now that saving goals are mentioned, you should probably set up new ones for now. Have goals can motivate you to actually reach them. If you write it down and include it in your budget plan, you will feel more encouraged to save more money for it. The goal can be your emergency fund or a more fuel-efficient vehicle. You can also save up for the downpayment of a house. Anything that you know your future self would need to improve – you can label it as a saving goal.
Find ways to earn more
This is obviously, easier said than done. But there are more opportunities to do this compared to the past. The gig economy is getting bigger and it is something that you can tap into. According to reports, 4 out of 10 companies are open to the idea of using more gig workers in the future. This will make it possible for you to keep your day job and earn a little extra on the side. Most of the people thriving in the gig economy are skilled workers. So find something that you are good at and hone that skill. You might be able to capitalize on this skill to earn extra. Anything you earn can be used to pay off your debts faster and increase your savings.
Think about consolidating debts to save more money
If you want to save more money while paying off debts, you need to choose the right debt consolidation strategy. What is great about this option is that it can improve your personal finances while getting you out of a tough debt situation. One of the ways it can improve it is by giving you enough room in your budget to save.
There are two ways for this to happen.
You have a lower interest rate
The first way you can save is through the low-interest rate. The savings will be more if you have high-interest debts – like credit card debts. If you consolidate using a debt consolidation loan, you will be guaranteed a lower interest rate. This is especially true if you have a good credit score. It will lower the amount you have to pay on the debt as a whole.
You can choose a low monthly payment
The second way that you can save more money is when you choose a consolidation loan that will allow you to make lower monthly payments. Since you can make lower payments, you have more room in your budget plan to save. It may be true that a lower monthly payment will make your repayment plan longer. However, it will also help you save up for something important – like an emergency fund. Once you have reached your emergency fund target, you can increase your debt payments.