Paying off debt is hard. And each phase of life seems to bring about a new phase of debt.
Though it can feel like you don’t have the ability to save any money while you’re paying off student loans, your mortgage, credit card or car loan, you most assuredly can–and should–build up your savings account, no matter how large or small your debt is.
Here are some helpful tips about the best way to start saving money while paying down debt:
- Use a free money-management tool, like DCCU’s The Hub, to keep track of your monthly spending, and create a budget. After you’ve figured out how much you spend monthly, as well as how much you’re going to put towards your debt each month, figure out how much you want to allocate towards your savings. This way, you’ll know a certain percentage of your paycheck is going towards your savings account each month.
- Also cut out unnecessary expenses, and set that money aside in a savings account. Look into a consolidation loan which can simplify your payments and often offer savings.
- Pay less than you can (but at least pay the minimum) on your monthly payments while you start an emergency savings fund; most experts recommend setting aside three to six months’ worth of expenses. There’s nothing worse than disaster striking and you going deeper into debt.
- Set up your student debt payments as a graduated plan. That way, your loan payments will start small and increase as the years pass, allowing you to save more money straight out of school, when you’re most likely making less than you will in the future.
- Consolidate personal loans, credit cards and holiday bills into one easy to manage payment.
- Pay off loans with the highest interest rates first.
Saving money while paying off your debts can seem stressful to people who just want their loans to go away. But it’s crucial that you have money saved up so that when the debt is gone, you have something to fall back on and won’t rely on another loan or your credit cards.