You know paying off debt is essential, but it sure is difficult to save money at the same time. We understand. Trying to budget and scrape together extra cash each month often feels impossible when you're dealing with loans, credit cards, and other expenses to deal with. But what if we told you there are simple, practical ways to find some extra wiggle room in your budget that can help you save more while you're paying down debt?
In this blog post, we're sharing our favorite easy tips for saving money even when you're on a debt payoff journey. These're realistic strategies anyone can put into practice. Ready to learn some savvy ways to keep more cash in your wallet? Your savings account will thank you!
Cutting Expenses - Reduce Spending on Wants Before Needs
To trim away on expenses, you're going to need to reduce spending on things you want versus things you need. Check your bank and credit card statements line by line and categorize each transaction as a "want" or a "need". Be honest with yourself here. Do you really need premium cable and multiple streaming services or the latest smartphone model? Probably not.
Look for ways to cut the fat in areas like:
- Entertainment (streaming services, cable, dining out, hobbies, etc.)
- Transportation (public transit, carpool or bike instead of driving)
- Housing (move to a smaller place, get a roommate, lower utility bills)
- Subscriptions (gym membership, product deliveries, digital services)
- Impulse buys (snacks, in-app purchases)
Once you've identified the "wants", trim as many as you're reasonably able to. Every amount helps when paying off your debt. Throw extra money towards an emergency fund
The Debt Snowball Method - How Focusing on Small Debts First Helps Save
The debt snowball method is a great debt repayment strategy to pay off what you owe while still saving money. Here's how it works:
- List all your debts from smallest to largest. Cover your minimum payment on everything except the smallest debt. Throw as much money as possible at that smallest balance until it's gone. Then move on to the next smallest debt, making minimum payments on everything else and putting extra money towards that next debt.
- This method works because quick wins keep you motivated. Eliminating those small debts fast gives you a mental boost to keep working towards becoming debt free. The snowball effect kicks in as the monthly payments you were making on those small debts are now applied to the next ones on your list.
- Before you know it, the smaller debts are repaid and you have built up momentum to really make progress on bigger balances. You'll have extra money each month to put towards the next debt on your list. Stay focused and keep working your way down the list, no matter how long it takes. Every single paid-off debt gets you closer to financial freedom.
- The important thing is not to worry about interest rates. Pay off the smallest debts first regardless of APR. The psychological benefits of quick progress will motivate you to keep attacking the next balance. Once the smaller debts are gone, you can put the snowball payments towards higher interest debts. At first, just focus on building momentum.
Before you know it, you're bound to achieve the goal of paying off what you owe while still saving money with determination and the power of small victories.
Increasing Income - Make More Money Through Side Jobs or Gigs
One of the best ways to pay off debt faster is to simply make more money. While you're working to trim away expenses, find ways to generate extra income on the side with a part-time job or freelance work.
Drive for a ridesharing service in your spare time. Companies like Uber and Lyft allow you to use your own vehicle to transport passengers and make decent money. You get to set your own schedule so you can work it around your regular job or family commitments.
Do freelance work like writing, programming, graphic design, or online tutoring. Websites such as Upwork, Fiverr, and 99Designs have jobs in various fields where you can find freelance work that fits your skills and interests. The more experience and reviews you get, the higher your rates can become over time.
Pick up a part-time retail or service industry job. Places such as restaurants, bars, stores, and entertainment venues often hire part-time help for nights and weekends. While the pay may not be glamorous, every extra dollar helps when you have debt to tackle.
Rent Your Spare Rooms
Rent out spare rooms in your home on Airbnb or VRBO. If you have an extra bedroom, in-law suite, or vacation rental, make money renting it out to travelers. You get to set nightly and weekly rates to maximize your income. Make sure to check regulations in your local area regarding short-term rentals.
Sell Unwanted Items Online
Sell unwanted items online. Check around your attic, basement, garage and closets and look for valuable items you no longer need. You can sell things on websites like eBay, Craigslist, and Facebook Marketplace. Price items competitively and be willing to negotiate to turn your clutter into cash to put towards your high-interest debt first.
Every dollar counts when making monthly debt payments. Adding a side hustle or part-time work, no matter how small, generates extra money each month to put towards your balances.
Debt Consolidation - Combine Debts Into One Lower Payment
One of the best ways to save money each month is to consolidate multiple debts into a single, lower-interest debt. This means taking out a lower-interest loan to pay off your credit card debt, medical bills, personal loans, and other debts. You'll make just one lower payment each month instead of juggling multiple payments.
Lower Your Interest Rate
The main benefit of consolidating your debt is reducing your interest rate, which can save you hundreds or even thousands per year. Look for a personal loan, balance transfer credit card, or lower-interest line of credit to pay off your high-interest debts. Make sure the interest rate on the new debt is lower than what you're currently paying.
Having one single monthly payment makes it easier to budget and less likely you'll miss or be late on a payment. No more sending checks or logging in to multiple websites each month to pay each debt.
While debt consolidation offers many benefits, there are some potential downsides to be aware of:
- You may end up paying more overall if you lengthen the repayment term. Make extra payments when you can to pay the debt off early.
- You need to stop using credit card balances and incurring new debt, otherwise, you could end up in a bigger hole. Make a budget and spending plan to avoid getting into debt again.
If it's done responsibly, consolidation can be an effective way to pay off debt faster and save money each month. Compare offers from multiple lenders to find the right consolidation solution for your needs. Then make a plan to pay off the new lower-interest debt as quickly as possible.
Government Assistance to Help Save
There're several government programs that can help supplement your income and allow you to put more money towards debt repayment each month.
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