Focused on Paying Down Debt? You can Save too!

Pay-Off-DebtWhen setting out your financial goals, you most likely favour one over the other: paying down debt or accumulating savings. Which should deserve your most immediate attention (and extra dollars)? Is it possible to accomplish both of these goals at the same time? What if you didn’t have to choose and could work towards two separate goals at once?

Truthfully ,you can. It just takes wise budgeting and planning.

The Case for Saving

When it comes to saving for a rainy day, the rule of thumb is to put away around 10 percent of your monthly earnings.

I’m sure almost everyone would agree that that is a great idea, but what if your budget is stretched pretty thin already? Perhaps you feel that you should direct any excess cash towards paying down your debt load.

While this is in theory true, saving (even little bits) does help your eventual goal of paying down debt by socking a little cash away in case of an emergency. The thing with emergencies is that you can rarely plan for them (i.e. things like car repairs, house repairs, etc.) and the likelihood that you’d have to use credit to pay for them is higher.

Not only would you rack up your debt further and erase headway you’ve made, you are accumulating interest- so using credit when you can use cash is ultimately going to get you further ahead.

Small amounts matter

Saving can be daunting, especially when you feel that small contributions are a drop in the bucket. But rest assured, those drops will accumulate over time to fill the bucket (in this case, your bank account). You’ll be surprised at how quickly it can add up.

To start out, just to show the power of accumulation, make a commitment to save all of your change over the period of a month. Put it in a jar, and see how much small amounts can add to over a set, reasonable amount of time.

Find “Saving Spots” in your Budget

“Really, I have no extra money to dedicate to saving”, you may keep repeating to yourself. Chances are, you may have more than you think.

Do you grab coffee on the way into work every morning? Do you spend money on eating out, cable packages or expensive clothes?

A little tweak here and there, in terms of where you are spending- and in realigning your priorities can fund your savings. Commit to making your own coffee, brown bagging lunch or rethinking your cable access. Pick one extra  that you spend on a regular basis, and move it into savings.

Make it Seamless

When you have determined how much you can afford, after tweaking the budget, the next step is to be active in making it happen- on a regular basis. Saving is not an act of financial gymnastics. It is a habit- which much be understood, learned and embraced.

As with all habits, they work best when they are painless and seamless. Find out if your workplace offers payroll deductions for savings. If not, visit your local financial institution to arrange for an automatic savings program. Most offer a number of different options in terms of frequency and amounts.