Saving While Reducing Debt
- Tuesday, February 2, 2010, 15:00
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With a whole year ahead of us, and last year behind us, we can all look back at our past mistakes when it comes to our finances. Most of us will come to realize that we may have spent more money than we needed to, or more money than we even had, which in turn put us in deeper debt than we wanted to be at this point in our lives.
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A goal we are all likely to have is to decrease our debt to zero if possible and save a bit of money at the same time.
Now many people will just assume that this is next to impossible because their debt might be too high to imagine it ever being gone, or saving has never been a priority and it just seems too hard to get into the trend.
It is a lot easier than most might think to do both saving and cutting down your debt.
Let’s first tackle your debt. You have to analyze your spending habits, and one of the best ways to do this is to go on your online banking and examine your spending habits on both your debit card and your credit card.
If you do happen to use cash on a regular basis, remember that the transaction will show up in your bank account once you withdraw the money, so be sure to take it into consideration.
Now consider what you can cut back on, in other words, what might be a luxury. If you happen to eat out every day, then consider saving your lunch money and using it to cut back on your debt. Pack yourself a lunch from home and you will be shocked to see how much you really save.
By budgeting yourself, you will easily be able to reduce your debt, it will definitely take time, but in the end it will be worth it.
Now we must move onto the question of saving money while reducing your debt. The easiest way to save money while reducing your debt is to set up an automatic payment to a savings account. You can choose to do this weekly, biweekly or even monthly. Just be sure to get it done and you will hardly notice the money leaving your account.
By following this bit of advice, you will find yourself easily reducing your debt and increasing your savings along the way.
Tom Drake is the writer behind Canadian Finance Blog. To read more of Tom’s posts, subscribe to Canadian Finance Blog’s RSS feed and follow @CanadianFinance on Twitter.
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About the Author
Bank Guru has written 45 stories on this site.
My real name is Banking “Guru” Smith, yes my parents were bankers and believed that I one day would become a famous banker just like them. I enjoy a double-double coffee, super long lines at the grocery store and annoying CSR’s (Customer Service Representatives or more commonly known as ‘Tellers’). I also forgot to mention that I invested in Madoff, think I will ever get my money back?
2 Comments on “Saving While Reducing Debt”
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Hi there,
I have even been tortured by this varying question of reducing debt and saving at the same time. If one has high-interest debt, would it not make even more sense to add the amount that you are saving onto the debt as well? That way, you will reduce your debt even faster and save a lot of interest at the same time.
Good question… Personally I’d try paying off the high interest debt first but it all depends on your own circumstance. If your high interest debt isn’t a lot compared to your low interest debt (and i mean a big difference). I’d probably try paying off more of the low interest since the interest amount would be higher. Paying it off would help make it more manageable… then you can focus on the high interest.
Sounds a bit confusing… but ultimately each situation is different and i highly suggestion sitting down and working it all out on paper (or computer)