How to Both Pay Off Debt And Save More
December 31, 2020
Consumers intended to spend just over $1,000 for the holidays in 2019, according to a survey from The National Retail Federation. For those who don’t budget for holiday spending each year, this could mean accumulating debt, and it also could lead to difficulty in trying to pay it off come January. Read on to learn some strategies to pay off holiday debt and save more.
Here are some suggestions on how to pay off holiday debt, or any other debt you may have:
- Choose a payoff method, such as:
- Avalanche: Pay off your credit card with highest interest rate first while still making minimum payments on other cards. Then pay off the next highest interest rate card, and so on, until you have no debt left.
- Snowball: Make the minimum payment on each credit card while putting extra funds toward the card with the smallest balance, and then the card with the next smallest balance, and so on until you’ve paid off all debt.
- Consolidate your debt into a new, lower-interest-rate loan
- If you have a good credit score this may be an option to consider since it could save you money on interest. For more information about credit scores, read our previous blog on the topic: How to Improve Your Credit Score.
Start budgeting now
When you’re working on your 2021 budget, include holiday spending, planned vacations, and other financial goals you have. Then, set up a separate savings accounts for each goal. To make saving easier, you can set up automatic transfers from your checking account to each savings account. For example, if you wanted to save $1,000 by December you could set up automatic transfers of $91 per month. Including savings goals in your budget can help you avoid using credit cards and accumulating more debt.
Other ways to save
You can save money by purchasing decorations during after-holiday sales. Also, consider using a cash-back credit card for purchases, which can help you save throughout the year. And, if possible, put part of your stimulus payment toward debt and part into savings.
Any savings you’re able to generate can be used to pay down debt and help you reach your goals for 2021.
Tags: Money Management, Tips and Tricks, Savings