Taking Back Your Finances: 7 Tips on How to Save Money and Pay Off Debt

Businessman putting coin into the glass jar with young plant, demonstrating financial growth through saving plans and investment schemes

No one wants to be in debt, but the fact is, most Americans are. The number hovers around 80% of total Americans, and that is a daunting figure.

When it comes to learning how to save money and pay off debt, many of us just do not know where to start.

What are the techniques and mindsets it takes to face your debt and conquer it? We are glad you asked.

What follows are our suggestions for how to approach debt repayment. Keep reading to find out how to solve the problem of debt for good.

7 Starting Points for How to Save Money and Pay off Debt

Whether you are a financial whiz or just getting started on your debt repayment journey, these seven tips can help you. Read on to discover a tip you may never have considered.

1. Make a Realistic Budget

You simply cannot begin to wrap your head around your debt problems until you have some semblance of a budget. You need to get a handle on the amount you take in and exactly where it goes.

The key to creating a realistic budget is partially in the categories you choose. Go wide to start. A workable budget can include around 30 categories without overdoing it.

Once you have your categories, you can get a detailed account of how you are spending your money. Then, you can begin to see where you can make cuts that will go toward paying off your debts.

There are several web-based tools for budgeting. Mint is a bare-bones one, and You Need a Budget is a more comprehensive tool that offers an approach to budgeting based on “giving every dollar a job.”

2. Use the Debt-Snowball Method

Once you are ready to begin paying off your debts, you can go the route of guru Dave Ramsey’s debt-snowball method. Using this method, you pay off your debts from smallest to largest. Once you have paid a debt in full, you roll that payment into the payment on your next largest debt.

In this manner, you earn a sense of control over your debt, since you can pay off total balances quicker than in other methods.

3. Explore Debt Consolidation

Debt consolidation is not for everyone, and if it is for you, a thorough research process will go a long way toward maximizing your benefits. Not every debt consolidation loan is as good as it seems, and you need to watch out for predatory lenders with incredibly high interest rates.

If you have done this research and found a trustworthy lender, debt consolidation loans can offer a simplicity that many people need when beginning to pay off their debts.

4. Work a Side Gig

This is the advice few of us want to hear, and we get it. “Just earn more money” is not a pill that goes down easy.

Here is the trick. Your side gig does not have to be forever. You do not have to become a delivery driver for the rest of your life.

That said, if you are able to fit in even a few hours of another job every week, you can put all of that money toward paying off debt. You owe it to yourself to find out more info about the kinds of side jobs that might work for you.

You do not have to take a job to earn extra money. You can sell things too. If there are books or records you no longer have in regular rotation, putting the money you make from selling those things toward your debts can give you long-term satisfaction in a way your Rolling Stones vinyl might not at the moment.

5. Pay More Than the Minimum Payment

Minimum payments are guidelines, not laws. But often, people in debt get attached to the idea that their minimum payments are the amount they pay toward their debts, and that is that.

If you start to think of your minimum payments as true minimums, the paying off of your debts can become a sort of game. Every time you earn extra money or do not spend the full amount in another budget category, you can take that money and allocate it toward a greater debt repayment.

These payments do not even have to be lumped together. Rarely are there penalties for paying off a debt multiple times in a month, and the sense of satisfaction you can get from doing so is unbeatable.

Reorient your thoughts toward your minimum payments, and you will see massive savings on interest down the line.

6. Be Responsible with Unexpected Earnings

It is one thing to get a bonus or underspend a budget category in a month, as we hinted at in our advice on minimum payments. It is another thing to come into a serious windfall.

This windfall can come in many forms. You may come into an inheritance. You may even win the lottery!

The important thing is to have a plan before these unexpected financial events occur. We are not trying to take the fun away from them, but if you do not have a plan, they can become more burden than fun.

The first thing to do with a windfall may be not to touch it at all, or it may involve donating part of the money.

Once you get to budgeting the windfall, you should spread it across your various budget categories. If you focus it entirely on debt repayment, you might create resentment toward your budget and your debts, which will lead to breaking your commitment to your plan in the long run.

7. Focus on High-Interest Debts

This strategy is a complement to the debt-snowball method, or an inversion of it, depending on your perspective.

Here is how it works. Rather than focusing on your smallest debts first, you begin by paying off your highest interest debts. This allows you to lower the total amount you pay on your debts by eliminating those that grow quickest.

The benefit of this method is that it truly lowers the amount of your debt in the long term. The big drawback is that you lose the sense of immediate mastery over your domain that many people get from the debt-snowball method. Only you will know which approach will give you the most mileage, and there is no harm in experimenting with both.

Having No Debt Is Having Freedom

We cannot overstate the importance of exploring multiple avenues for repaying your debt. Hopefully, these tips have given you ideas on how to begin your own journey. Once you learn how to save money and pay off debt, it becomes easier to breathe in your daily life.

For more information on all facets of debt, check out our other debt suggestions.

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