How to Save While Getting Out of Debt

debt reductionWhen trying to get out of debt, does it make sense to save? Absolutely. Not being prepared for an emergency with ready cash could lead to more severe debt. It is possible to both pay back debt and save at the same time. It just takes commitment and a little knowledge.

Here are some tips on just how you can save while still keeping your debt payments on track.

Setting up Your Savings

If you are starting from scratch, meaning lots of debt and no savings, do whatever it takes to put $500-$1,000 aside right now. While this may seem like a gargantuan task, it can be done. Take out a second job on a temporary basis, hold a huge yard sale, cut out the cable or even (yikes) the cell phone, eat Ramen noodles for a month. Yes these may seem like drastic measures, but digging yourself out of a large hole and toward a life of financial security takes commitment.

Why do you want to have $500-$1,000 saved? This is your emergency fund that will cover you in the event that something serious happens, such as medical bills or a car breakdown. This money should be designated in a separate account, not in the same one you use for checking.

Getting Credit Counseling

Look to non-profit debt consolidation companies that will help you consolidate your debt and even lower your interest rates, all while giving you sound advice. This will make paying debt along with putting away savings much easier. You may even be able to get your interest down to 0 percent APR, if you qualify and are willing to have your credit locked down until all of your debt is paid.

Creating a Budget…Really

Set up a budget. There is no way around this one. Take the amount of money that comes in every month and designate where it should go. You need to account for the last penny if you are serious about both paying down debt and increasing your savings.

Try to par down your expenses. Don’t forget to pay yourself by creating a line item for savings. Aim for about 80 percent of your income for regular bills plus debt repayment and 20 percent for savings. If you can automate that 20 percent into a savings account each pay period, all the better.

Adopting New Savings Habits

With a budget, you’ll know exactly how much you can spend on each category, and it may quickly become clear that there are certain things on which you have been overspending, and this realization may spark some new and better spending habits. For example, it suddenly becomes obvious that you are handing over triple the amount for a coffee at a fancy coffee shop versus brewing your coffee at home. Incorporate the extra money you don’t spend toward your debt payments and your savings account. Learn new ways to make your money stretch to cover more, and make a real effort to save a little bit each day.

 

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About Mary Ann Romans

Mary Ann Romans is a freelance writer, online content manager, wife and mother of three children. She lives in Pennsylvania in the middle of the woods but close enough to Target and Home Depot. The author of many magazine, newspaper and online articles, Mary Ann enjoys writing about almost any subject. "Writing gives me the opportunity to both learn interesting information, and to interact with wonderful people." Mary Ann has written more than 5,000 blogs for Families.com since she started back in December 2006. Contact her at maromans AT verizon.net or visit her personal blog http://homeinawoods.wordpress.com

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