No matter how much money you make, you can be in debt and feel like you’re sinking. Unexpected expenses come out of nowhere, and you might find it hard to save money. What you need to do is pull yourself up by your bootstraps and set up a plan to not only get yourself out of debt, but also save some money so every emergency doesn’t put you back into debt. Read on to learn how to get out of debt and save some money.
1. Track Your Spending
You will need to see how much money you have to pay off your debt, keep track of your expenses for a month or so, and make sure to add in unexpected expenses like car repairs and vacations. Finally, compare your monthly expenses with your monthly income. If you have a surplus, you can use this amount to pay down your debt and build your savings. If you are short, you will need to cut down your expenses.
2. Cut Expenses
Once you track your spending you will see some ideas where you can cut back. You have to be honest with yourself when you track your expenses, and write down every single penny. You might be surprised how much you spend on take-out, for example. Once you have figured out your spending habits, you can identify where you can make cuts.
One way to save money is to reduce your grocery bill. Stock up on sale items, and when you can, live out of your pantry and freezer and skip shopping for that week. You might be able to skip one week a month this way, which could potentially save you 25 percent on groceries. This will only work if you stock up on sale items. You will, of course, need to pay attention to items on sale that you can store for future use.
3. Pay More Than the Minimum Payment
Put down more than the minimum monthly amount requested on your statements and pay off your debt faster. As an example, if you pay $40 per month on an 18 percent interest rate card with $1000 debt, you will pay off your debt in 29 months. Compare that to if you paid just the minimum payment of $20 a month, and you will end up paying that same amount for 89 months instead. See how much faster you could be out of debt?
4. Pay off Most Expensive Debts First
Take the debt that charges the most interest and put all your extra money towards that, and pay only the minimum payments on all your other debts. Once the most expensive debt is paid off, take all the money you were paying on it and put it towards the newt most expensive debt. Continue with this until you have paid off all of your debts. This is called the snowball method.
5. Become A One-Car Household
It might seem really inconvenient, but could you get rid of one of your cars and become a one-car household? The average person spends a lot of money to pay for car payments and to maintain and operate their cars. If you use that money to pay off your debts, it will make a huge impact on what you owe.
6. Get a Second Job
If possible, get a second job or take extra shifts as often as you can, and put all the extra money towards your debt. Once your debts are paid off, you can quit that second job or reduce the number of shifts you work.
7. Build Savings
When you get paid, only put into your checking account the amount you need to pay your bills for that pay period. Put the rest into a savings account, which will be your emergency cushion in case something happens. Use this money instead of your credit card if, say, you need to buy a new tire. Put all “found” money here, including birthday gifts, work bonuses, and more.