To many people this might seem like an impossible task. When you feel as though you’re drowning in debt, saving money is probably the last thing on your mind. But, with a bit of self-control and by taking advantage of a range of financial mechanisms, you can not only meet all your debt obligations, but actually save money while doing so.
We’re going to take you through the basics of paying off debt and saving money at the same time. And, by the time you’ve finished this article, you’ll be well-equipped to get back in the black and meet your individual savings goals all at once.
Ask yourself the tough questions
The first and most important thing to do when you’re making a big financial decision like this is to understand where your money is going and the areas in which it could be placed more effectively.
Scrutinise your weekly expenses, create a budget that is strict and make sure your stick to it. It’s important to set an ultimate target, as well as regular indicator goals that you’ll pass on the way – these will help you understand whether you’re on track to achieving the end goal and if you need to change your strategy along the way. By making a strict budget (and keeping to it!) you’ll have no excuses when it comes to paying off debt and putting money aside to save.
Cut down on luxury spending (dramatically!)
This one might be a little bit tough to stomach for some people, but it’s a crucial step and probably a pretty obvious one as well. If you’re determined to meet your individual financial goals, you’re going to have to decrease your luxury spending in a major way. While it may be difficult to give up some of your favourite expenses in the short term, these sacrifices will be well worth it when it comes to achieving financial freedom and security.
Reducing luxury spending is a habit that can be built and strengthened every day. For example, do you really need that morning coffee? Do you really need to buy your lunch out everyday? By asking yourself these questions regularly, you’ll find it’s easier to decrease your luxury spending and have more money to put aside for paying off debt and for saving at the same time. In fact, you might be surprised how dramatically these small changes can tip the balance of your weekly budget!
Increase your contributions whenever possible
As you start to implement healthy financial practices, you’ll probably start to notice quite a bit of leftover money accumulated at the end of each week or month. And, while this is a great position to be in, and certainly something you’re well within your rights to feel positive about, it’s important to never get complacent – just because you have money left over, now is not the time for a victory beer!
To continue progressing financially, it’s vital to direct these funds to the right place, which is either your debt repayments or savings account. And, if you’re finding you have a similar amount left over at the end of every month, this might mean it’s time to reevaluate your monthly budget and start increasing your repayments permanently.
Consider consolidating your debt
If you’ve acquired a few different debts, in several different locations, it can be quite tricky to keep track of every payment you need to make each month. As a result, saving money and keeping track of your budget is made that much more difficult.
Consolidating all your debts into one location can help you understand your overall financial positioning, and accurately plan your finances for the weeks and months ahead. By only making one payment to reduce your entire debt, you can stay abreast of your actual progress and effectively budget around this repayment amount, as well as the money you need to put aside for savings.
Open a high interest savings account
Having all of your income and expenses coming in and out of the same account can make it difficult to save. Most banks offer high interest savings accounts at no extra fee. By rerouting all your savings into an account that grants 2 – 4% interest per annum, you are investing your money into an account that makes it more difficult for you to access your savings in the short term and also rewards you with interest repayments over the long term. This will make it much easier for you to meet your savings goals, and manage to pay off your debt in the process.
Share your plan with friends and family
Financial problems can be quite a hard topic to broach, particularly with the people we care about the most. When you stop to think about this though, it doesn’t make much sense – our friends and family are generally the people who are best equipped to help and support us in achieving our goals, no matter what they might be.
By letting your nearest and dearest know of your financial goals, and the proactive approach you are taking to reduce debt and reach financial freedom, you are putting yourself in a stronger position to achieve these goals in the long-run. Not only are your family and friends less likely to pressure you into expensive situations when they know you are trying so hard to change your reality, but they will also help in holding YOU accountable for your everyday financial decisions. It’s so much harder to spend big on a night out with your co-workers, when you have to face your friends and family in the morning and they’re aware of your financial plans and obligations. Most importantly, friends and family can offer support when you need it, and help make tough financial moments easier to pass through.
Indeed, paying off debt and saving at the same time is never easy, but it is possible. With the right tactics and support networks in place, you can pave your path to a financial reality that is free from debt and full of savings, all at the same time.
