How to Save Money
and Pay off debt
Whatever one’s financial status may be, one thing is for sure; everyone is yearning to achieve their Dream life – a life with financial freedom!
But how do you achieve financial freedom when your financial state is tough?
The financial situation varies for every person. Some can earn more, save as much, and live comfortably without worrying about their finances, while others struggle to make both ends meet. Most people live from paycheck to paycheck, which leads them to fall into unbreakable cycles of debt. Thus, making it more difficult for many to set aside for savings or have at least an emergency fund during the rainy days.
Turning things around on your finances may be challenging, but as long as you are determined and work towards achieving your goals, financial freedom is possible.
To help you work on your way for your financial goals – may it be SAVING or be DEBT- FREE, we listed up ideas on how you can start to accomplish these goals.
Have a definite Financial goal in mind.
It is essential to set a clear goal on where you are headed in terms of your finances. You may want to establish an emergency fund, save up for a short-term or long-term goal, or eye to get rid of all your debt. It is like having a road map of where you want to achieve financial freedom.
You might get standard advice to do Saving and pay off debt simultaneously. Balance is the KEY!
Be determined to start establishing an emergency fund so when the going gets tough, all your efforts towards your goal won’t be wiped out in one swing if something comes up unexpectedly.
Check your Financial obligation.
First and foremost, get a hold of what you owe. Determine how much you should settle to ensure that you can afford to cover these recurring bills before plunging into other expenses. Settle all your minimum payments on all of your debts. Be mindful of the due dates so you won’t miss out on payments to avoid late payments. A missed payment could affect your credit score, and charges can add up over time. Thus, it makes sense that these “charges “should have been allotted to pay off your debt or add up on your savings rather than being used to pay late payment dues.
Create a Budget
Creating your budget helps to categorize and track your income and expenses easily. You may use spreadsheets or download an app tracker to make it easier. You may start your Budget list with your monthly income, including your paycheck and other sources like income from your side hustles, bonuses, and tax refunds. Next on the list is your monthly expense, including house rents/mortgage, utilities, food, and transportation. Find the difference when you subtract your expenses from your income. The amount you’ll get is what you will allot for your savings and paying off your debt. You may try to adapt the 50-30-20 rule to guide how much you should allot for your goals. Setting 50% for expenses, 30% for discretionary spending, and 20% for saving and debt payment.
Have a little extra on your checking account
If possible, reserve a little in your checking account. This amount should not be touched in any way. Having a cash buffer in place will let you avoid overdrawing, and you won’t run the risk of overdraft charges.
Once you build a little breathing room through your “reserved” cash, this will make debt payment manageable, thus making way for you to start growing your savings. As you progress, you’ll be able to eliminate debt little by little. This could also mean that you may start establishing your emergency fund that is equivalent to 3 to 6 months’ worth of your essential expenses. This fund will serve as your safety net, protecting you from falling for debts if unexpected financial woes come along.
You also consider looking around to shop for a savings account with better rates that could add up over time and be added to your savings amount. Extra incomes in the form of work bonuses, income from side gigs, refunds from tax, and cash gifts can boost your savings, too. Always keep track of your expenses and maximize your cash flows.