Saving Money While Paying Off Your Debts

Having debt can make life difficult. It’s hard to save money and make plans if you’ve got big payments coming out each month, and it can be depressing to see your balance going down as soon as you get paid. That’s why it’s best to try and pay off debts as soon as you can, so here are some tips to help you do so.

Look at cheaper refinancing

One of the reasons that it can be hard to pay down debt is that you end up paying the interest each month, but not the capital. Over time, you can end up paying a lot more due to high APR, so refinancing may be a better option for you. For example, if you have lots of high interest credit cards, or a costly second mortgage, then taking out a caveat loan might be a better option. Having this lump sum allows you to pay off your debts in one go, and then, you simply have one payment to make each month.

If you choose to go this route, it’s important to be cautious. The last thing you want is to end up in even more debt. You need to make sure that the overall cost of your repayment will be less than you’re paying now, and that you have a clear plan to pay things off. Seek financial advice if you can, as this will ensure you’re doing the right thing.

Consider the snowball method

One method that some people find helps them pay off their debts is the debt snowball. It works like this:

  • You list all your debts from smallest to largest
  • You draw up a budget, seeing how much money you have left at the end of the month after bills, living expenses, and all other outgoings
  • At the end of the month, you use your leftover money to pay off the smallest debt first, making sure you keep making minimal payments to the other debts
  • Once the smallest is paid off, you do the same to your other debts, until you get to the biggest one

If you have a lot of little debts, and don’t feel motivated to pay them off, this can be an excellent way of starting to do so. However, you need to ensure you keep up with your minimum payments on all debts, otherwise you can default and end up with bad credit or worse, so you need to be very organised too.

Get financial advice

Those who find themselves in a particularly bad financial situation might want to look for professional help. Financial advisors are excellent at helping you balance your budget and see where your money is going. They can then help you with a long-term plan to get back on track. While an appointment with a financial advisor will cost you money, ultimately, it can also save you a lot in the long-term, as you aren’t just stuck in an endless debt cycle.

Look at ways to boost your income

It can be frustrating to be in debt, as it can take such a long time to clear. That’s why it’s worth considering ways to boost your income, so you can pay things off much more quickly. For example, you could take on some overtime, or even look for a second role that’ll bring up your income. While this is hard work in the short-term, it means you can pay your debt more quickly, so you pay less.

Reduce other expenses

The more you reduce your expenses, the more you’ll have to pay towards your debt. While this can mean a change of lifestyle, at least you know your debt is getting paid, and you will be saving money and not paying it off for the rest of your life. Some areas where most people can save money include monthly subscriptions, whether it’s to streaming services or subscription boxes, nights out, and holidays. Sacrificing them for a year or two can help you wipe out your debt much more quickly.

Simply making a spreadsheet and writing down your expenses can help a lot. It can help you see where your money is going, and easily lay out where you can save money. If you’re struggling to cut back, look through your budget and work on it line by line. If your insurance policies are about to run out, compare costs to save cash.

Debt can feel like a millstone around your neck, preventing you from doing the things you want to do in life. Therefore, it’s important to pay off debts as soon as you can, otherwise, you end up paying the interest off for years and years. If you’re struggling with money, then this can be a challenge, but there are ways you can organise your finances and get out of debt.