How to Pay Down Debt and Save at the Same Time (Without a Magic Wand)

Maybe you put a once-in-a-lifetime vacation on the credit card and now you feel like it’s going to take the rest of your lifetime to pay it off. Or maybe you borrowed for a new roof and then got slammed with a transmission problem in your just-out-of-warranty minivan. Most of us have been in debt at one time or another.

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While there’s no magic wand (and few are blessed with an inheritance from a rich uncle), there are ways to pay down your debt while saving money for the future.

  1. Repeat after me: No more new debt. Whether getting into debt was your “fault” or just a matter of bad luck, you have spent money on things you can’t afford. It’s time to stop. Rip up your credit cards or at the very least, give them to a friend to hold onto.
  2. Change your spending habits. Think before you buy. Do you really need the designer brand shampoo? Can you give yourself a pedicure? Have you tried the store brand cereal? When’s the last time you clipped coupons? Go to the grocery store with a list and stick to it.
  3. Cut out the fluff. You may think you HAVE to have cable when you already subscribe to two streaming services. Or you HAVE to have a landline even though both you and your spouse (not to mention each of your kids) have their own phone. Or you HAVE to have to drive a newer model car when your neighbor’s 2001 sedan is running better than yours. Really assess your situation and see what you can cut out.
  4. Make a budget. Just like dieting, when you write it down, you’re much more accountable. You probably have no idea where all your money is going. Seeing your finances in print helps you make better decisions.
  5. Start an emergency fund. This is money you absolutely can’t touch unless it’s really and truly an emergency. Where will the money come from? Right from your checking account. Set up a weekly transfer and you’ll never miss it. Start with a small amount and raise it as you can afford it.
  6. Make sure you pay your minimum balance. Always. Don’t get yourself in more trouble by skipping a payment.
  7. Get rid of the smallest debts first. It may not be the one with the highest interest rate, but it will give you a psychological boost to eliminate even the smallest debt. It’s one less to deal with.
  8. Save your pennies.  You’ll be amazed how much you can save just by throwing spare change in a jar. Another way to save is every time you make a “good” financial choice, put the amount you would have spent on the “bad” choice right into the bank.
  9. Negotiate with creditors. While you can’t count on having your debt erased, some creditors will lower a monthly payment for you. Also look into lowering your mortgage rate!
  10.  Consider debt counseling. There are professionals who can help you if you can’t help yourself. Consider this option if you need to.

Congratulations on getting started. And good luck! You can do this!

For more advice on how to everything from lowering your mortgage rate to figuring out how to save for college, check out Allstate’s tools and resources.


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