The Simple Savings Plan You Can Start, Even If You’re Still in Debt

We’re under more pressure than ever before. Our incomes have stayed the same while the cost of living has gone up. Not only that, but we’re also in a lot of debt.

Most people are just getting by and not putting anything into a savings plan. The median American savings account is $4830. That may be enough for a minor medical emergency or a major car repair.

You don’t have much to retire on, you don’t have much to take on vacation, and you wind up struggling from paycheck to paycheck. That’s no way to live life.

Despite this bleak outlook, it is possible to save money, even while deep in debt. Keep reading to find out how. 

creating a savings plan

Take an Honest Look at Your Numbers

Do you really want to save money and pay down your debts each month? Then you need to be honest with yourself. This is simple as putting your expenses and income into a spreadsheet or financial software.

The numbers will tell the story. You’ll be able to see where your money is coming from and where it’s going every month.

Your first instinct will be to justify those numbers, like “I needed to spend $100 on a night out because my friend was in town.”

Don’t justify. Just look at them. Be honest with yourself about where your money is going.

Take a look at how much you’re spending each month in debt payments. Are you spending $300 on student loans and another $200 on credit card payments each month?

Creating a Simple Savings Plan

Your next step is to figure out how much you want to save each month. Do you want to set aside 10%? That can also be a hard number, like $300 a month.

Let’s total up the numbers. What’s the amount of money that you need each month to pay your bills, pay down your debt, and maintain your current lifestyle?

If you find yourself in a hole when you ally up these numbers, it’s OK. Later on, I’m going to give you ideas to increase your income and cut expenses.

Start with Something

You could be looking at your numbers and be completely freaked out because you aren’t even close to setting aside 10% of your income or $300 a month.

Instead of walking away and saying forget about it, start with something small. That’s way better than doing nothing.

What would setting aside 5% of your income look like or even 1%?

The numbers become less intimidating and you can work your way up to increase your savings.

Open Up a Savings Account

The best-laid plans go nowhere fast if no action is taken. You want to make your savings happen, then have a dedicated savings account.

Go to your bank and set one up. Some banks might let you do this online without having to visit a bank branch.

Just make it happen.

Automate Your Savings

Online banking is pretty awesome. You can do just about anything without having to take the time out of your day to

One thing that you can do is automate your savings. Set up banking transfers to happen when you get paid.

The withdrawal happens automatically, so you won’t really miss the money in your checking account.

Making the Numbers Work

Once you take those simple steps to start a savings plan, how do you light gasoline on the fire and make your savings grow? These are the things that you want to do to increase the amount you can set aside for savings and debts each month.

Have a Side Income

There are two ways to tackle savings and debt. You either have to cut expenses or increase your income. There are dozens of ways to increase your income.

You can get a side gig while working full-time. Selling things on eBay or Amazon is another option.

The point is that you need to have a bump in income to build up your savings and pay down your debts faster.

Pull Your Credit Score

A lot in life is determined by your credit score. Your ability to get a job or an apartment. Your ability to get a new loan or credit card depends on your credit score.

You want to know where you stand in the world of credit. You also want to check because there may be things on your credit report that don’t belong there, which you can have taken off of the report.

Restructure Your Debt

When you hear restructuring your debt, you immediately think of a corporation fighting its way out of bad times.

The thing is, you can use this strategy to lower your interest rates and in some cases, your monthly debt payments.

Here’s how it works. Some debt that you carry like credit cards and some loans have a high-interest rate. That means your paying way more than what you actually owe in interest. That makes the monthly payments higher, too.

What you can do is get a personal loan or refinance loans at a lower interest rate. This will lower your monthly payments and give you more money to set aside for savings while paying down your debt.

The trick to making this work is that you need a good credit score to get a better interest rate.

Make Savings a Priority

At this point, it becomes a matter of priority. What’s more important to you, being financially responsible or having everything that you want now?

It’s a difficult question that everyone struggles with. There’s no easy or right answer, it really depends on what you want. If you want to stress less about money, you’ll lean towards cutting expenses.

You may find that you don’t need all of those cable channels because you only watch a couple of them. You’re better off cutting cable TV and using a streaming service. Better yet, you can do something productive with that time you’re saving being a couch potato.

You can put more time into your side gig, read books about entrepreneurship, or take an online class to learn a new language.

You have to be honest with yourself about what the most important things are in your life and place your money and your time accordingly.

Cook at Home

You can save money and maintain your lifestyle if you get creative about it. The place to start is your food and grocery budget. Americans spend over $3000 a year eating out.

You can cook more often at home and take leftovers for lunch, which can save money. For those nights when you don’t feel like cooking, you can use Groupon or the Entertainment guide to save money on restaurants in your area.

Smart Grocery Shopping

Grocery shopping is one of those things that you either love to do or hate to do.

If you have kids, you know that it’s an impossible task.

They want to have every sugary snack in sight, which can add to your grocery bill.

When at all possible, go grocery shopping alone or tag team with your spouse or partner. One of you takes the kids and entertains them while the other plays Supermarket Shopper and gets everything on the list as fast as possible.

Another thing you can do is to buy in bulk. Feeding a family is expensive and you can cut down on some of those expenses by buying things in bulk and storing them or freezing them can save a ton of money.

Use Your Local Library

There is a ton of free entertainment content at your local library. You can stream videos, rent DVDs, audiobooks.

Libraries are awesome for free content. Some libraries have access to Kanopy for documentaries and arthouse films, others have Overdrive or Hoopla.

All of these services are free through your local library and they let you stream movies and videos. That’s a great replacement of your $100 monthly cable bill.

A Savings Plan is Playing the Long Game

We’re so used to having everything happen instantly that we forgot how to be patient. It’s like the cartoon The Tortoise and the Hare, where they’re racing against each other and the tortoise wins because it’s at a slow and steady pace the whole way through.

You have to take the same approach with your finances. A little bit each month can go a long way towards financial freedom.

Lay out a 1 year, 3-year, and 5-year plan as to what you want your finances to look like and map out how you’ll get there.

By taking the long-term approach you won’t get frustrated a few months in and give up.

Saving Money and Paying Debts is Possible

There are countless strategies to save money. There are also countless strategies to pay off debts. Some experts say that you have to pay off your debts first before you start saving, but it is possible to do them at the same time.

The most important things you can do to put yourself on the road to financial freedom is taking a long hard look at your budget and be honest about your financial situation and your priorities.

You can then make decisions based on your priorities without completely going into scarcity mode. Once you do that, you can start making progress putting money aside and pay down your debts.

Do you want more great tips on saving money? Check out these money habits to help you be financially independent in 5 years.