4 tips to help you save money when in debt

Amid the increasing prices of necessities and the stagnation of wages, saving often seems more challenging than ever. On top of sustaining your existence, you still have to repay all the debt you owe. However, whether it’s for retirement, contingencies, or travel, saving money is still essential. You might not believe it, but it’s still possible for people buried in debt to save money and pay off their debts at the same time. The following tips may help you out:

1. Set your priorities straight and create a budget plan

Given that your income is limited and you have debts to pay, you need to create a budget plan to allocate your income to your needs and debt repayments. Paying back your debt will be moot if you’re no longer alive to pay it. Thus, your budget should allocate an adequate percentage of your income for living expenses. To put it simply, if your monthly income is considered 100 percent, 30 percent should be put towards living expenses including food, rent, clothing, medications (if any), transportation, and utility bills. The 70 percent remaining should be allocated to savings and debt repayment, which should add up to approximately 20 percent and 50 percent, respectively.

When you make a budget plan, make sure to stick to it until more than half your debt is paid. For the sample above, this means that if you make $60 a day, you can’t spend more than $18 daily on living expenses. Think of ways you can make it work with these figures. You can choose to wake up and leave home for work earlier and walk, instead of taking a taxi every day.

Once you manage to pay off 75 percent of your debt, you can consider making substantial revisions to your plan, but always make your needs and priorities clear. It’s also important to exert effort to avoid incurring additional debt, as that would impact your capacity to save and spend on living necessities.

2. Create a separate debt management plan

With your overall budget plan as a guide, strategize how you will be paying off your debt. Given the amount of your daily income that is allocated for debt repayment, how long are you expected to pay off your debts? Prioritize paying off those loans with the highest interest rates so that you will incur fewer interest surcharges over time. Write your debt repayment strategy as a comprehensive plan, where you also set time tables and target dates for settling your debts.

3. Monitor your daily expenses and cut back

The purpose of your budget plan is to allow you to monitor expenses. You can’t exceed the percentage of your daily living allotments, so you need to keep track of the things you are spending every day. Ditch your credit card and opt for cash-based budgets instead, so that you can prevent yourself from impulsively buying junk or luxuries you don’t need.

Aside from your credit card, you also need to ditch unhealthy practices such as alcohol, cigarettes, soda, and junk food. Smokers, in particular, may need help from doctors and quitting advocates so that they can get rid of money-draining (and health-draining) cigarettes for good.

If you still have a good set of clothes, shoes, bags, furniture, and appliances, there is no need to buy new items. Impulsive buyers may need to adopt a cash-based budget system that lets them carry only enough pocket money their daily needs to control expenditures. You also need to institute measures to cut back on utility expenses and eliminate waste of energy and water. In the process, you save money and the planet at the same time!

4. Earn some extra money

Babysitting, online freelance work, selling used items, setting up a small retail business, and engaging in other part-time work are some of the ways you can augment your existing income and increase your savings. Just make sure that you track your income and adhere to your budget plan and debt payment strategy so that you don’t squander your hard-earned extra money.

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