Many people prioritize paying off debt over saving money. Perhaps they want to pay their monthly dues on time, so they can avoid late payment fees or additional charges. Instead of allocating some cash for their savings, they need to set aside a significant portion of their income to repay their loans.
With proper financial management, you can divide your income to finance your daily needs, utility bills, monthly loan payment fees, savings, and other necessary expenses… and still pay off your student loans.
How can you get started? Check out these five tips for paying down your debt while still saving money:
Set a goal.
If you want to save money and keep up with your monthly loan payments, set a savings goal. If you set a financial goal, you can determine how much money to save each month.
Whether you need to allocate budget for your next trip or you want to save money for your retirement, keeping a particular goal in mind will help you stay on track.
Trim unnecessary expenses.
One of the most effective ways to save money while paying off your debt is to trim your other expenses. Therefore, sort out your budget and determine your essentials so you can eliminate unnecessary spending.
For instance, you can cut down on your “wants” and focus on your “needs” instead. Save some of your disposable income every month and put it in your savings account. If you find yourself spending excessively at the grocery store, try slightly reducing your grocery budget. Just make sure that it won’t affect your daily needs.
Shopping around for utility providers can be a great way to trim your expenses. By using tools like this Calculator you could save up to $600 a year on your cell plan!
Plan an effective repayment strategy.
If you aim to save money while you pay off your loans, create and follow an effective repayment plan. The “avalanche method” or alternatively, the “snowball method” can help you pay down your debts.
The “avalanche method” involves paying off your high-interest debt first, then focusing on your lower-interest. Pay your debt with the highest interest, then pay chronologically, and before you know it, your debt will be paid!
The “snowball method” works in reverse – you pay off your low-interest debt first and work up to your high-interest debt. Paying this way can help you gain momentum until you’ve paid off all your debt.
Stick to the “80/20 rule.”
Are you familiar with the “80/20 rule” or Pareto principle? If not, this is one of the most effective ways to pay off your loans and focus on your priorities. Allocate 20% of your income to your savings, and allot the remaining 80% to everything else— bills, daily expenses, and monthly loan payments.
The “80/20 rule” works better if you arrange automatic withdrawal from your checking account to your savings account. Make sure that you withdraw one or two days after payday in case your company delays your check.
This type of budgeting strategy is simple, but it can significantly boost your financial standing. When you exert more effort on your finances, you’ll get plenty in return.
Avoid taking out new loans.
Aside from setting your goal, planning a repayment strategy, and creating an effective budget plan, you should also avoid taking out new loans. If you don’t want to spend your salary on paying high interest rates, pay your existing loans first and don’t apply for other lending offers.
You can get advice from loan experts or check professional lending websites, such as https://adelaidebroker.com.au/business-loans/, to know what your best options are.
Ultimately, it’s up to you to choose a loan repayment strategy that fits your financial situation. But the sooner you will pay off all your debt, the more money you’ll save for the future!