It’s estimated that the personal debt in the U.S. is currently at $14.96 trillion with around 77% of American households claiming to have debt. It can feel nearly impossible to start achieving your savings goals while struggling under debt. But with proper financial management, most individuals can pay down their debt while simultaneously saving for the future.
Balance Debt While Saving – 3 Things to Start Doing Today:
- Pay More than the Minimum Payment per Month
Before you can begin aggressively saving for a home or college fund, paying down debt will need to take priority. When you pay more than the minimum payment (whatever you can afford will help), you avoid additional penalties and reduce debt faster. It also keeps your credit scores stable as you begin planning out specific savings goals. Keeping your credit score from decreasing allows you to actively support any large purchases in the future – such as getting approved for an auto or home loan.
2. Establish a Budget to Get The Complete Financial Picture
Understanding how much money is spent on unnecessary expenditures can help you cut waste and reallocate that money toward debt payments and savings. Along with helping to make lifestyle changes, a budget can create a consistent schedule for debt payments that can eventually evolve into scheduled savings deposits. A budget also helps you see your own progress!
3. Start Building an Emergency Fund
Another great way to begin saving while in debt is to start building an emergency fund in a new or old savings account. Why? When debt payment is the priority, unexpected expenses can easily derail your progress. By saving 5-10% of your monthly paycheck towards an emergency fund, you provide yourself with greater financial flexibility when the unexpected happens. This cushion will essentially allow you to make emergency payments without running the risk of falling behind on your debt. And once you’ve been able to pay off your debt, the cushion can serve as the foundation for your new savings goals, like that beach vacation!
Paying down your debt and reaching your savings goals can seem incompatible. But they actually work together when you have a plan to pay down your debt that supports your savings too. Get started today with valuable tips, tools, and resources at The Edge. It’s totally free for military families.