Get Out of Debt First, Then Focus on Saving
When you’re in debt, it’s nearly impossible to save money. To motivate yourself for the mission of getting out of debt, ask yourself these two questions:
- How much money am I paying towards my debt monthly?
- How else would I like to use my money?
The money you save while paying off debt is not likely to earn as much interest as the interest you pay towards your debt. It makes much more sense financially to commit to paying off high interest debts first, and then you'll have more money to save. Sometimes, it even makes sense to use your savings to pay off debt. Here are some tips for getting out of debt so you can save or invest the money you're currently using to make your debt repayments.
Designate your money with a budget.
This allows you control where your money gets spent rather than wondering where it all went. Stretch your budget dollars by using coupons alongside sales papers and use an allotted amount of cash rather than your debit or credit card. Also, use the Internet for numerous sites offering coupons and freebies.
Make your primary mission to become debt free.
While it saves you money to pay off debts with the highest interest rates first, sometimes it helps to pay off your debts from the smallest amount to largest. It gives you a sense of accomplishment faster. Remember though, each time you pay off a debt, that payment amount is now available to apply towards to the next debt to significantly reduce the time it will take to achieve financial freedom.
Consider transferring your high interest debt onto a 0% balance transfer credit card.
They are available for six months or twelve, introductory rate, and offer the opportunity to pay off principal debt rather than paying primarily on interest.
Get a new insurance quote.
You may very well be paying much more than necessary for your auto, home, and life insurance. You can easily compare insurance quotes online through sites like netQuote and esurance. Type in your info once and get multiple quotes, for each insurance type, and do comparison shopping from the comforts of home.
Dining out is not a priority.
Until you’re free from debt, dine out as seldom as possible. Plan your meals in advance and build your grocery list according to your week’s menu. This will save you money on your grocery bill and on eating out too frequently. Let your slow cooker/crock pot work for you. This includes breakfast and lunch; make your own coffee and pack your lunches (yours, the kids’, and dad’s too). Dinner leftovers can be used for another meal or lunches.
Once you designate where your money is being spent and strive for financial freedom, then you’re able to consider saving for short term (Christmas club) and long term funds (College & Retirement). The sooner you pay off high interest debts, the sooner you can begin saving and benefiting from the interest your savings earn.