5 ways for saving money while paying off debt

Accumulated debt could be extremely complicated to tackle. Lenders will not stop sending you reminders to discharge your outstanding dues as soon as possible. Non-payments will keep mushrooming the total cost of the debt. Your account might be sent to collection agencies as well, and if you still refuse to pay back the debt, a lawsuit must be waiting for you. Even though you are in indebtedness, savings are your obligation. Without stashing away money, you will not be able to meet unforeseen expenses. 

When you have a large size of debt to handle, you might feel inclined to stop saving to clear your dues sooner rather than later, but not saving money will keep accruing interest on the unpaid balance and force you to rely on no guarantor loans. It is a catch-22 situation. 

Undoubtedly, it could be challenging and frightening to set aside money while paying off debt. Well, even though you have to settle your dues sooner, the importance of putting aside money cannot be underestimated. 

Ways for saving money while paying off debt

Here are the ways to save money while you should settle your debt:

• Create a budget

First off, you should create a budget. Budgeting will help you gain insight into a real picture of your finances. How much money do you have, and how much do you have to pay off your debt? It is crucial to strike a balance between inflow and outflow so you do not struggle to meet your expenses. 

Accumulated debt could cost you a lot of money in the long run, and therefore, it must be your top priority. Of course, it could be challenging to settle your debt sooner if it is way too much. In that case, you will need to figure out a repayment plan. 

Talk to your lenders if they put you on a minimum repayment plan. It would be a good idea if they could freeze your payments for some time. However, in both situations, you will end up paying much more than you will. This is because the interest will keep accruing. 

By creating a budget, you will understand how much money you have to pay for all your expenses. Since debt must be your top priority, you should figure out ways to whittle down your regular expenses. Discretionary expenses must be avoided so you can pay more than the minimum payment. You may even need to downsize your living style. 

Budgeting helps you know your real financial situation so you can come up with the right financial strategy. 

• Save money on your groceries

It is likely that the money you save on discretionary expenses is used to settle your debts. Even at this time, your budget will not have wiggle room to stash away for a rainy day. You should consider ways to cut back on essential expenses. Groceries are what you spend most on. Grab your bank statement for the previous three months to evaluate how much money, on average, you spend on groceries. 

You will surprisingly find that they are way more than you expected. Start noting down all expenses. Figure out where you can cut back. For instance, you can cut back on coffee or tea. There is no point in stocking up on things if you are already in debt. Make sure you buy only those things in bulk if per unit costs you less money, and they will not go off soon. The money you cut back on purchasing groceries should be set aside for a rainy day. 

• Resist your temptation

Most of the people end up ruining their budgets because of their temptation. Impulsive buying is one of the biggest factors that push people on the verge of debt. As money drains out quickly, people fail to have enough savings. This forces them to take out loans for bad credit with no guarantor. 

On no account are impulsive purchases recommended. If you are tempted to buy things like clothes and footwear, you should use a 48-hour rule. It means you should wait for at least two days to make the final decision. In the meantime, you should simply make a list of things you want to buy. 

Eventually, you will figure out that your list goes outside the window. It is paramount to identify the difference between your needs and wants. Money should be spent only on necessities. 

• Automate your savings

Even if your budget is not flexible, you should still choose a sum of money to set aside for a rainy day. It does not have to be 10% or 15%. The amount of savings will be decided by your budget. As your debt declines, your savings contribution should go up. You might be tempted to spend some of your money on inessential expenses., but bear in mind that these expenses should remain banned until you discharge the whole of the debt. 

Whether you are able to put by 2% or 5%, you must save for a rainy day. It will preclude you from unnecessarily relying on loans to meet emergency expenses. Try to automate your savings. Linking your savings account to your salary account will help you pay yourself first. 

• Increase your income

It is likely that you struggle a lot to manage your debt payments along with your savings goals. If your budget cannot manage both, you should try to increase your income. Try to ask your boss for a pay hike, or if it is not possible, you should find a new job with a higher pay. 

You could also consider getting a part-time job or working on a freelance project. It will help you earn an extra stipend that you can employ to pay off your debts and grow your savings.

The final word

Saving money at the time of the settlement of outstanding debt could be a bit challenging. You should carefully look over your budget to see where you can cut back on. If it is not sufficient, increase your income sources.