Table of Contents
Ever wonder where all your hard-earned money goes? You’re not alone. Many feel the same way, realizing that it is the first step toward taking control of your finances.
Did you know that roughly 56% of Americans can’t cover a $1,000 emergency expense with savings? If you’ve managed to save $1,000, you’re already ahead of the curve.
But let’s be real: going from zero to one hundred with restrictions isn’t sustainable. It’s about finding a balance that works for you. You can pay off debt without feeling like you’re missing out on life. By taking small, manageable steps, you can start your debt payoff journey and begin saving money.
Here are some tips to help you get started paying off debt and saving money today:
Pay Off Debt
Choose a debt pay-off method
Snowball or avalanche
The snowball method: List your debt from lowest to highest. Concentrate on paying off your lowest debt while paying minimums on the rest of your debt. Once you are done paying that off, move on to the second lowest debt. The more debt you start canceling, the more money you have left over each month to send to the next debt.
The avalanche method: List your debt from highest interest to lowest interest. Concentrate on paying off the debt with the highest interest rate while paying minimums on the rest. Once you are done, move on to the second highest interest debt.
Any extra cash you want to send to debt, depending on which method you choose.
If you are super disciplined, choose the avalanche method because it will mathematically save you money. If you need to see small wins to keep you motivated and on track, the snowball method is for you.
Take breaks
If you need to send less money to debt or pause for a month and then resume, that’s fine! The idea here is that you don’t give up. There is no rush to the finish line as long as you get there.
Find a balance that works for you. No doubt paying off debt can take the joy out of your day and it is hard. But remember, having debt is also hard and takes an emotional toll. Choose your HARD.
Add rewards along the way
What can you buy or experience to help you keep your eye on the price? Spending money to motivate you to keep going will not erase the progress that you made. Spending responsibly, of course!
There is no right way to pay off debt. There is only the way that works for you!
A fun dinner outing of $75 does not compare to how much you are sending towards debt. I highly encourage rewards!
Add visuals
We love to see progress and can keep you motivated! Draw a pyramid and color in how much debt you have paid off, or list your debt and cross it out when it is paid off.
You might focus on the debt that you still have to pay.
A visual can remind you that you have made progress. Let this be evidence that what you are doing is working.
Find an accountability partner
Staying motivated with an accountability partner is easier!
They don’t need to have money goals, it can be any goal but have someone who will be checking in. Book check-in dates and go over progress during a cheese and wine night.
Refrain from letting this debt pay-off journey be boring!
The debt pay-off journey can feel very lonely because no one is talking about their debt. If more people were willing to share their numbers, you would realize that the majority of Americans has debt.
Save Money
I want you to see savings as you take care of future YOU. If you were let go of a job or sick and had to take days outside of your PTO, your savings would allow you to take care of yourself without stress.
Having the future in mind, let’s get into action →
Calculate your monthly expenses
List all your essential expenses, including rent/mortgage, utilities, groceries, transportation, insurance, and minimum debt payments. Don’t forget to include discretionary spending like entertainment and dining out. Add everything, and you will have your monthly expenses.
You want to save three to six months of monthly expenses
Set a realistic goal date
When would you like to meet this goal? Determine the total amount you need for three months of expenses and get clear on how much you need to save monthly. Do not be hopeful by being aggressive about the amount of savings per month.
Make sure this goal is realistic and achievable based on your current income and expenses.
Create a budget
Create a detailed budget that includes your income and all your expenses.
Allocate a portion of your income towards savings every month. Treat your savings goal as a non-negotiable expense because this is your priority.
Automate your savings
Set up an automatic transfer from your checking account to your high-yield savings account on the day you receive your paycheck. This ensures that you will meet your goal without having to think. It is as if the money doesn’t exist.
Cut unnecessary spending
Identifying non-essential expenses in your budget that can be reduced or eliminated can help you free up more money. This could include dining out less, canceling subscription services you don’t use, or finding more affordable alternatives for your regular expenses.
Increase income
Look for opportunities to increase your income, such as taking on a side job, freelancing, negotiating your salary, moving jobs, or selling items you no longer need on the Facebook marketplace. The extra income can speed up your savings goals.
Monitor your progress
Review your budget and savings progress regularly. Create a visual and place it somewhere visible to keep you motivated. Remember to celebrate each milestone.
Stay Consistent
Saving consistently, even if it’s a small amount, is crucial. The habit of saving will help you reach your goal. Avoid the temptation to dip into your savings for non-emergencies.
Emergency fund vs sinking funds
Differentiate your emergency fund from other savings goals. An emergency fund should be easily accessible, so consider keeping it in a high-yield savings account. If you want to save for travel, create a separate savings account known as a sinking fund.
Review and adjust
Review your budget and savings goals. As your financial situation changes, adjust your goals and contributions as needed. If the plan you set initially is not working and you need to extend your savings goal, you are allowed to do so. Adjusting your goal is better than giving up completely.
Follow these steps to stay committed to your debt and savings plan. You will be well on your way to building financial security and peace of mind. All this is possible by starting today and taking one small action every day. Paying off debt and saving takes time.
Give yourself grace as you build these strong money habits.
When we work together
- I help you create a debt repayment and savings plan that works for you
- I help you find money in your budget you did not know you had
- I help you make your money work for you while you focus on living life
If this resonates with you, I want to invite you to work with me! I want to help you get out of survival mode and the constant stress due to money. Book a sales call.
I cannot wait to be part of your journey!
