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Thread: Saving Money and Paying off Debt

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    #1

    Question Saving Money and Paying off Debt

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    My brain is all over the place trying to figure out the best way to go about this. DH and I are going to take our honeymoon later this year, which we are wanting to save up for. At the same time, I want to pay off some of the debt that is left on my credit (I have paid off a great deal of it within the past year) but I am having trouble trying to figure out a good way to budget money to save for our rainyday and honeymoon fund as well as pay off debt at the same time.

    One way I was thinking was setting aside a certain amount each paycheck strictly for savings (something like 20-50) and then after paying our bills, using some of what is left over to pay off some of the other debt.

    I guess my question is, does anyone have experience with saving money AND paying off debt at the same time? And if you do, what was the best way you found to go about doing so?

    Thanks in advance!
    "Insanity is doing the same thing over and over again and expecting the same results." ~Albert Einstein

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    Yes, we're doing that! I have automatic payments to the two credit cards we have left, and automatic transfer to savings every month. 150 in savings, 100 every two weeks to credit card one and 200 once a month to credit card two. Then we pay our bills(which are few, cars,car insurance, Internet and a automatic debt Payment from long time ago). What's left we spend on us. At the end of the month if there is a substantial amount left I choose a credit card to put it on, if not I throw it into savings.


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    I'm doing it right now! I have two credit cards I'm trying to pay off, and I'm trying to save a few thousand by the end of the year. From each paycheck I save anywhere from 50-150 (my income is variable). And then I alternate by month which credit card I focus on... each month I just pay the minimum on one card, and put around $150 on the other. This has helped them go down faster. Any extra income gets split between savings and CC.
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    We have 3 expenses we are saving for and I calculated how much we needed by June and then broke it into monthly payments that get directly transferred to the savings account for them. Those are then wrapped into the monthly budget. For example in December I realized we needed $800 on hand to pay for cat expenses and he was going to cost $200 this month to board, so every month since January through May $200 gets moved. Same for moving expenses and car maintenance. I would be super stoked about freeing up money in June but my student loan payments double then so at least the timing works out well.
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    #5


    Example:
    (Based on one income)

    Monthly income (after taxes): $2000
    Calculate fixed expenses (mortgage, utilities, car insurance, etc) say that is : $800/mth

    Then take what is left over ($1200) and divide that into 3 categories:

    Paying off debt: $400

    Savings: $400

    Daily expenses: $400 (this category then gets split up into weeks, so, you budget to only spend $100 a week on groceries/gas/going out/etc)

    If you get paid bi-weekly, divide everything in half per paycheck

    Ie. $400 to fixed expenses, $200 to paying off debt, $200 to savings, $200 to daily expenses. (Aside - I currently live off of about $50/week, so there is room to put more into savings/debt if you don't require $100/wk).

    If you did this, (with this example) in one year you would have an extra $5200 in savings and $5200 less in debt. And that's for one person! If you are a dual income, you can expect that to almost double.



    ETA

    I follow this method and it has been working wonderfully for 2 years. In addition to paying off debt, I also pay an arm and a leg to visit DF, which I have been able to comfortably do. The way I find this works the best, if that I have my chequing account and 2 savings account. One for savings and one for my monthly fixed expenses. I pay everything manually, that way it is done on my timeline and I control the payments - not the other way around (no auto-pay other than my mortgage). It might require a little more diligence then allowing companies to take the payments, but from working at a bank, I see too often people's money get messed around with and its scary to think they (bill companies) can take whatever they "think" you "owe" them and then you have to fight for it back after the fact.


    ETA 2

    ... one more thing. I LOVE my ING account. Online savings is the way to go!!! Money is out of sight, out of mind and pays MUCH better interest than the banks. And if you need it, its an online transfer and 24hrs away! Ok, that's it - I swear!
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    #6
    Here's an example of what we do:
    Bi-Weekly income: $2000
    10% gets direct deposited into savings- I never see it in my paycheck
    40% goes to "bills" account. This is typical living expenses- insurance, rent, groceries, gas
    30% goes to "debt" account. This is all student loans now
    20% stay in checking for incidentals. Clothes, car expenses, dinner out, etc

    That's a really basic breakdown, but you get the idea. The main thing to shoot for is to look at what you have once all your necessary bills are paid. I'm talking rent, student loans, mortgage, etc. MUST PAY items. After that, look at what you have left, and what you want to save. Try to find ways to cut corners, such as couponing, driving less, eating out less, etc. Keep track of how much progress you make in those areas, and start putting it all into a savings account. My method is to put it in savings FIRST. That way, I'm not tempted to overspend on anything. It requires a lot of work and attention to your habits, but it definitely pays off in the end.

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    #7
    What I've done/am doing is figure how much needs paid off/saved and by when. Then I figure out how much that is per month. Say I need 6k in 12 months. Then $500 a month goes towards that. Variable expenses like groceries, gas, extras (going out to eat, movies, etc.), etc. will be tighted up on to make more money available for what needs paid off/saved. I also do automatic recurring payments online so it is just done and then what is left over for the month/that paycheck is left.
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    I automatically have 10% of my pay contributed to my company's 401(k) and profit sharing plan. That way, I am saving for my retirement and at the same time I am also reducing my taxable income base for purpose of my income tax burden at year's end. I then have a taxable savings account (aka not qualified funds) that I auto transfer into as well. My student loans are all on auto pay as well.

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