It can be overwhelming when you want to save, especially in debt. You will be faced with the probability of compromising on your lifestyle to save money and meet your debt obligation at the same time. But don’t despair, as, with some extra help, you can maintain a balance between your savings and paying some of your debts off.
The question weighing heavily on your mind right now could be probably if you should save or pay off your debts. It may seem impossible to have some savings while facing the burden of debts. The inability to pay off your debts may contribute to your poor personal financial stability. If you are determined to have some savings while in debt, you do not have to worry, as you can achieve your dreams as long as you make some sacrifices. These sacrifices, however, don’t have to be permanent, as you can have them until you are financially stable.
You should realize that how you decide to save while paying off your debts depends on your income or your general financial situation. There is no magic involved or a one-size-fits-all answer that will help you pay off your debts and save when it comes to attaining financial stability. Financial stability depends on your income, level of debt, expenditure, and if you already have any investments or savings set aside.
Though saving while paying off debts doesn’t seem to make financial sense, it will give you peace of mind which is important in your life. Having some savings for a rainy day will play a huge role in easing your fears which at times is vital as paying off your debts. Making sound investments or maintaining a savings account will help you earn interest, eventually favoring you.
This article will show you how to start saving while managing your debts. It will also highlight some of the moves you can make to ensure you attain financial stability.
Set Up a Saving Goal
When you decide to start saving, it's important to set up a goal so that you will know why you are saving. Whether you want to save for retirement, a road trip, or your kids' college fund, having specific goals will motivate you to save. So the question arises of how you will build your savings since this is the key to attaining your saving goals. One way is to ensure that you save something every time you have some money.
Set up Three Different Saving Accounts
You can talk with your bank and ask them to link your checking and saving accounts with your ATM card. Then once you have done this, open three different saving accounts, each account having a different purpose. For instance, you can label one account as an expenses account where you save for those unexpected bills. Have the next account for investments and the third for emergency funds. With this kind of arrangement, you will be prepared for any emergency that may crop up and hinder you from saving and paying your debts on time. Another advantage of these different saving accounts is that they will help you overcome impulse buying if you are an impulse buyer.
Another way to ensure you put something into your savings account is by having only the amount you will need in your checking account. To achieve this, ensure you know how much you spend during the time between your pay and ensure you put only that. If you put more money into the checking account, the temptation to spend it will be higher. Keep the extra cash in your savings account, and start building your account.
To start building your savings, you will need to have your savings goals. For instance, if your goal is to save for a vacation in two years, start by depositing at least 10% of your monthly salary into your trip savings account. This will ensure that you have saved enough money by the time you want to take your vacation. You should also ensure that you regularly put whatever remains from your investments, gifts like birthdays, bonuses, and holiday checks into this account to ensure you achieve your goal on time.
Have A Budget
A budget will help you understand your financial situation, and you will always know how much you have against your expenses. With a budget, you know where every dollar of your money goes, from your expenses, debts, savings, and you will be able to know if you are overspending. With a realistic budget, you will be able to make a minimum payment on your debts, and this will go a long way in ensuring that you are eventually debt-free, a situation that will give you peace of mind. A budget will help you always make a minimum payment on your debt and curb overspending, which will help your credit score. You will realize that when you fail to pay off your debts in time, they accumulate interest, setting you back financially.
After having a budget, scan it to ensure that there are no unnecessary items. If you find items you can do without, you can transfer those funds into your savings account. Also, look for ways to eliminate hidden expenses while shopping and save on these expenses.
Ensure You Have A No spend Time In Your Routine
One way of ensuring that you keep your spending down is by having a no-spend time in your routine; you can decide to have a no-spend weekend, and the money you could have spent during this weekend you put away into your savings. When you have a no-spend time, it means that during this time, you do not touch your cash, use your credit or debit card. You only use what you have during this time. You can have a packed lunch at work. You can use the bus instead of your car to go to work. You may decide to watch TV and forgo going out for entertainment at other times. If you had scheduled shopping for new clothing on your no-spend day, you wouldn’t go, but you can check for something in your closet instead.
Keep track of Your Money
One way to ensure you save and pay off your debt is by tracking your money. Tracking your money means keeping a track record of your earnings and ensuring that you spend less than your earnings. You will have to keep track of your money, know where your money is going by looking into your expenses. Figure out your expenses, both the expected and the unexpected, for a certain period. These expenses may include home and auto repairs, vacations, and gifts. Then divide this number by the number of months during the period you accumulated the expenses. For instance, if you take the expenses over one year, then divide by 12 to ensure you know how much you are spending in a month. Once you have your monthly expenditure, compare it to your monthly income. If your monthly income surprises your expenditure, use the excess, put some into your savings account, and pay off some of your debts. On the other hand, if you realize that your monthly expenditure is higher than your income, it's time to make some lifestyle changes and cut back on some expenses.
Minimize your Spending And Put The Money Into Your Saving Account
Since you do not have an unlimited supply of money, it's vital to reduce your monthly spending and consider putting the extra money into your savings account. In case you are wondering how to scale down your spending while you feel like you have already done so, here are some ways in which you could minimize spending:
- Avoid making Amazon purchases,
- don’t subscribe to subscriptions that you rarely use
- Avoid eating out
- Share your ride with your coworkers.
Start Saving Small Amount Of Money
Saving is one of the hardest parts of gaining financial stability for most people, but you should realize that saving is saving no matter how small you start. Saving money when you are in debt and paying the debts off can be tricky. However, you can start saving once you have addressed your outstanding debts to avoid accumulating interest. You can start saving a small amount of money which will not have a huge impact on your budget. For instance, if you are earning $4,000 per month, you can decide to save 1%, which is $40 per month. If you continue saving, you will have $480 in a year.
Start Saving All Your Change
To attain financial stability, every penny counts. If you feel that saving is a hard act to pull off, you can start by saving the change you have after your purchases. You can save your change in a home bank and, after some time, like after three months, deposit the cash into your savings account. You can achieve this by utilizing the envelope system of saving.
If you do not use cash, you can ensure that you have what you need in your checking account and transfer any excess into your savings account. For this method to work, you will need to ensure that your saving account is not linked to your checking account to ensure your saving is protected.
Automate Your Savings
Sometimes, suppose you are an overspender and find it difficult to stick to a budget plan, especially if you have easy access to your money. In that case, you can automatically ask your employer to deposit the money into your savings account. To ensure you save regularly, you can have your savings automated. You can talk with your HR and have them transfer the amount you want into your savings account that is not linked with your checking account. This is one way of ensuring your savings are set aside even before spending your money. After you have saved, you can then pay off your debts and use the rest for your other expenses.
Downgrade Your Membership Plans
It requires some sacrifices when it comes to saving, especially if you are in debt. Sometimes you will have to reign in your spending by downgrading your membership plans. You may be a member at your local gym or even a dating site. If the membership isn’t worth your time, you should consider downgrading or not renewing them once they are up and consider putting the money into your savings account. You can try to save on your expenses by scaling back on those expenses at other times. For instance, you could save up to $100 on your monthly cable or internet bills.
Unsubscribe From Shopping Deals
If you find it difficult to avoid shopping, you can unsubscribe from your favorite stores' shopping lists to avoid the temptations of their sale offers. Some of these stores advertise well via email and can make you spend money you had no intention of spending, leading to impulse buying. You can also remove your information from your favorite stores, especially payment details. If you are an impulse buyer, online shopping will make saving a bit difficult, as you are a click away from that item you find on their shelves. Ensure you only buy what you need and have it on your budget, as these habits will go a long way in ensuring financial stability.
Look For A Side Hustle
Sometimes, you may realize that you still can’t save or even pay off your debts despite cutting back on your spending. Starting a side hustle to earn some extra cash can be your only way out of debt and ensure you have some savings in your account. When thinking about a side hustle or a way to earn extra cash, try to think about something you can do by utilizing your skills. Some ways of earning extra cash include and are not limited to:
- babysitting
- tutoring
- dog-walking
- freelancing
If earning extra is not something you are comfortable doing or don't have time for, you should consider selling stuff you are not using. You can sell these things online on eBay, Craigslist, or have a garage sale. You can also rent out any spare room at your place, and this way, you will earn extra cash and save money.
Impose A 24-Hour Rule
If you know you are an impulse buyer, you can impose a 24-hr rule on buying expensive and probably unnecessary items. Imposing this rule is one way you can overcome impulse online shopping as it will give you ample time to reflect if the item is necessary or it can wait for a later date.
Use Every Opportunity to Splurge As An Opportunity To Save
You can decide to make saving fun by ensuring that you put an equal amount into your savings account every time you treat yourself. This is especially true when you splurge on nonessential indulgences.
Limit Your ATM Withdrawals
You can limit your ATM withdrawals to once a week, which will help you save on the withdrawal charges. For instance, if every ATM withdrawal costs you $3, you will save a lot of money in the long run.
Pay Your Bills Automatically
You can ensure that all your bills are automatically paid, and this will help you save on the amount of money late payment gathers.
Save On Water Bill
Water is a necessity that we use daily and can gather a huge bill. If you are paying your water bill on an unmetered basis, you do not have anything to worry about, as your water bill will remain constant despite your use. However, if you are paying your water bill under a metered option, you must consider saving on the bill. You should note that you will be paying for all the water consumed in your home for water bills. This water includes drinking water, washing water, and the water you use to flush the toilet. To save on your water bill, you can implement the following tips:
- Have your water supplier install water-saving devices
- Fix any dripping water taps
- When brushing your teeth, ensure that the taps are off. Imagine your household wasting the same amount, though it may seem like the water is wasted while you brush small. This amount will gather a huge water bill over a prolonged time.
- Check whether your meter is turning when you are not using water in your house. If the meter is turning, it indicates that you leak somewhere. Check it or have someone fix it to avoid water wastage and huge water bills.
- Avoid taking baths as they consume a lot more water than a shower.
Worried About Saving While In Debt? Seel Legal Solutions Near Me
Remember, attaining financial stability requires planning and following through on these plans. You will have to invest your time, money and change your lifestyle to reach your financial goals. Time, effort and extra work will go a long way in ensuring that you are in a position to pay off your debts and save at the same time. Sometimes balancing these can be overwhelming and will require you to seek the help of a professional.
If you find you are in a situation where your debts are overwhelming you, do not hesitate to contact our lawyers at Los Angeles Bankruptcy Attorney who will advise you accordingly. Our attorneys are qualified when it comes to offering legal advice on money matters, and together, we will come up with a way where you can pay your debts off comfortably. Don’t hesitate to contact us at 424-285-5525 for more information.
