Debt can be a big burden and we do understand that it can take a toll on your financial as well as mental health. If you are under debt and do not understand how to pay off the money, you need to sit down and analyse your financial standing.
We have come up with some ideas that you can follow to get free of debt and still maintain your savings for the future. We must understand that paying off debt should be our priority as it is not a healthy monetary practice that you can hold on too for a long time. Loans, EMI’s, credit card bills, insurance premiums, or loans from friends and family members can be a burden.
Read on and know the ways in which you can eliminate such debts and still have savings in your accounts and wallets.
Set Financial Goals
Having a goal, financially is a must to do that an individual should understand and follow. Setting a goal to attain something that needs finances or creating a benchmark of reaching a particular net worth by a certain age both are considered in the same umbrella.
Do have a plan and goal set, this will help you in reaching financial status quickly. Follow a budget, pay off debts with help of savings and start afresh to reach the goal you are dreaming of.
Financial goals are of two types- long term and short term. Long term goals are for future investments like retirement savings or kids college funds, whereas short term goals may include creating a budget or paying off debt within a certain period.
For example: if you are in debt of 10k and want to pay it off within the next 6 months, then set this as your financial goal for that duration. It could also be saving a certain amount of money every month during the next year so that you can buy something special with it at the end of the year. Having these goals in place will keep you motivated and help to stay on track with your finances.
Reaching financial stability is not an overnight process but having proper knowledge and planning will help you reach your goal in no time.
Before setting any financial goals, make sure to consider your current situation, expenses and income. This will help you to understand what is realistic for you and will give perspective to the achievable goals. Make sure that you are realistic about these goals and not take on too much at once as it can become a hindrance in achieving other important objectives. Also, keep reviewing them regularly so that they stay relevant with changing life situations.
How Much to Save Every Month
Understanding how much to save each month can be a game changer again. Having a budget that defines – income, expenses, savings, and investments will give you a clear picture of how much money you need to have at bay to pay off the debts for each month. And once you have that, you can easily create an online savings account for it, and even earn interest on it.
We highly recommend paying off your debts each month to not face a burden of paying a bulk amount at once. It will not feel pressured on your pocket, and you will be well aligned with the charges and payments you must handle each month.
Build an Emergency Fund
Emergency funds come very handy in such situations where you have to pay off debts yet do not want to go cashless until you get your next pay. If you still do not have an emergency fund that has income of about 3 to 6 months, as mentioned by many experts; you must start building it right away.
Having an emergency fund will be handy in any situation like debt payment, health emergency, family emergency and many more. The best ways to build an emergency funds are as follows:
- Start small – It is important that you begin without feeling overwhelmed by the task. You should start with a very small amount like Rs.500 or Rs.1000 and then gradually increase it as your income increases or when you get extra money from any sources.
- Automate – You can automate your savings by setting up automatic transfers to a separate account dedicated for building emergency funds. This will help you save regularly and also prevent you from being tempted to spend this saved money on other things.
- Check interest rates & fees – Before opening a new savings account, make sure to check the interest rate and whether there are any applicable fees associated with it or not. Many financial institutions offer rewards programs which must be taken into consideration for maximum benefit.
Use Savings to Pay Down Larger Debts
If you are habitual of savings and do have some savings to facilitate the payment now, do not shy away and use it. Paying off debts, EMI’s loan amounts should be your priority if you look into your finances by yourself.
If you have enough savings (only id it is less important than debts) do use the cash and pay off your debts and start the saving plan again in the same amount after your shoulders are free off the debt amount.
Do I Need Other Savings?
Asking yourself this question can be a game changer. Ask yourself that you do not need to save more if the debts on you are only increasing and not decreasing. You must look into different investment options like Mutual funds, SIPs and more to sustain yourself financially in the situation where you need money.
We must understand that financial security is in our hands and there are many ways to make money from money. You can learn about some of those methods here. Just make sure you do all your research and get expert help when needed. We hope that the above information has been helpful for you.
