Yes, You Can Pay Down Debt and Save Money and Reach Your Financial Goals
Most Americans are in debt, and most are also not saving. I know many people make it a priority to pay off debt and put off saving until later. This is not always a wise idea. A better way is to do a combination of the two.If you are already struggling, you may feel that your situation is hopeless, but there is a way out.
First and foremost you need to know where your money is going. If it takes writing down everything you spend, then so be it. Using a debit card and reviewing your monthly statements is a good idea, too. Using cash is not as memorable if it is not written down. Cash can easily get lost in your purchases.
Now that you know where your money is going, ask yourself if this is where you want your money to go. Is it in line with your long-term and short-term goals? Do you want to save up for a house, or a car? Do you want to put money aside for your children’s education? Is how you’re currently spending your money going to allow these goals to be attained? If the answer is no, changes need to be made.
The easiest way to make changes is to look at the expenses in your budget that are variable; groceries, utilities, gasoline, dining out, entertainment, etc. How much money can you reasonably cut back in those areas?
Groceries and dining out are probably the easiest areas to cut back. At the grocery store, you can use coupons, buy items on sale, and cut out items you don’t need and aren’t good for you; like soda. Dining out is an optional expense, you can cut it out completely if need be. If you have a hectic schedule, buy a couple of frozen pizzas for the most hectic nights of the week.
Saving on utilities may sound like impossibility, but you can see if your electric company has a budget plan. There may also be discounts available if you make under a certain income. If the weather is hot, you can open windows at night instead of running the air conditioning. If the weather is cold, run the heat only when absolutely needed, and keep lots of blankets on hand.
For entertainment, look for free or low-cost options; take the kids to a park or have a family game night. Gasoline seems like a losing battle right now, but there may be small things you can do like driving less on the weekends or carpooling.
Once adjustments have been made to some of these areas, how much money is left over? Be realistic, do you know that you can’t stick to certain constraints? For example, my husband has a weakness for burritos. Luckily burritos aren’t too expensive so we plan for that expense in our spending plan. We are only allowed to eat burritos once a week, and that is good for our wallet and our waist lines.
Saving should be the number one priority for your family. The next priority should be paying off debt. How can you combine the two? Isn’t it better to pay off debt first? The answer is yes. It is good to pay off debt, but you need a cushion for yourself, too. What if you lose your job and you’ve put all your money into paying off your debts? You have zilch in your savings account, and the credit cards have been closed or maxed out. Even if you have credit available, you are bound to dig yourself deeper in debt. It is good to be prepared for the unexpected.
How much can you afford to set aside in savings? Even if you only have$25 available; it is a start. On payday, your first priority is to put the$25 aside in your savings account. Your next priority is to pay the bills and live off what is left over. Twenty-five dollars doesn’t sound like a lot, but if you get paid every two weeks, that’s $50 a month and $600 a year.
If that amount of savings sounds like a lofty goal, then it may be time to contact your local Non-Profit Credit Counseling agency. Your counselor can help you come up with a reasonable spending plan, that can help you save and pay off debt. In some cases, a Debt Management Plan (DMP) may be recommended to help you get back on track to achieving your financial goals.
