High debt and meager savings—should you prioritize repaying what you owe or building for the future? Balancing both is possible with smart strategies. But we always recommend you Get Out of Debt!
1. Establish an Emergency Fund: Start by creating a safety net for unexpected expenses. Aim for six months’ worth of expenses, but three months is a good start if struggling financially. Open a high-interest savings account to let your money grow while you focus on debt.
2. Minimum Debt Payments: Don’t neglect your debts. Make at least minimum payments to prevent late fees and protect your credit score. But, debt has interest. The more debt you have, the more you pay. We always recommend trying to pay more than the minimum.
3. Debt Repayment Strategies: Choose between the snowball method (paying off smallest debts first for psychological benefits) and the avalanche method (prioritizing high-interest debts). Make payments beyond the minimum each month, utilizing unexpected money or savings from budget cuts.
4. Finding Your Balance: While debts may take years to clear, postponing savings isn’t realistic. Prioritize paying down significant debt while making modest savings contributions. Once debt-free, redirect your entire previous monthly payment towards aggressive savings.
In conclusion, strike the right balance for you and your family, stick to the plan, and watch your financial landscape transform.
