The Money Challenge. Build Savings and Reduce Debt

Ready to take control of your money and build a stronger financial future? It's a common goal to pay down what you owe and start saving more. Here are three popular and helpful ways people are tackling The Money Challenge and achieving these important goals, with a focus on setting realistic savings targets:

1. The "Little Wins, Big Results" Plan: Getting Ahead One Small Step at a Time

• The Approach: This plan focuses on paying off your smallest debts first. You pay the minimum on everything, but any extra money goes towards the debt with the smallest balance. Once that's gone, you put that payment amount towards the next smallest debt. At the same time, you start building an emergency fund in a savings account that you can easily use if you need it. A key part of this is setting an achievable monthly savings goal for your emergency fund. Start small – maybe aim to save $50 or $100 per month, depending on your income and expenses. The goal is to build the habit of saving consistently.
• Why It Works: Getting rid of those smaller debts quickly gives you a great feeling of accomplishment. It's like winning little battles that keep you motivated to keep going. Having a readily available emergency fund helps you avoid going further into debt if something unexpected happens.
• Things to Think About: This method might mean you pay a bit more in interest overall because you're not focusing on the most expensive debts right away. Also, make sure your savings account is earning some interest to help your money grow. When setting your savings goal, be honest about what you can realistically put aside each month without feeling too stressed or deprived. It's better to set a smaller, achievable goal and meet it consistently than to aim too high and get discouraged.

2. The "Smartest Way to Pay Less Interest" Plan: Focusing on High-Cost Debts and Watching Your Money Grow

• The Approach: This plan is all about paying off the debts with the highest interest rates first. You still make the minimum payments on everything, but you put any extra money towards the debt that costs you the most in interest. To stay organized and see how you're doing, you use budgeting tools or apps to track your income and spending. As you work on paying down debt, don't forget to include a small, but consistent, monthly savings goal. Even if it's a small amount like $25 or $50, it helps build the savings habit while you tackle your high-interest obligations.
• Why It Works: By tackling the debts with the highest interest first, you save the most money on interest charges over time. Budgeting tools help you understand where your money is going and find ways to save more to put towards your debts and savings.
• Things to Think About: This approach might not give you that immediate feeling of success because you're focusing on the bigger, more expensive debts. You need to be patient and keep at it. Also, make sure the budgeting apps you use are safe and that you actually look at your budget regularly. When setting your savings goal here, consider what you can realistically save after making your debt payments. Even a small amount consistently adds up over time.

3. The "Earn More, Spend Smarter" Strategy: Finding Extra Money and Managing Debt Wisely

• The Approach: This involves trying to earn extra money, maybe by getting a part-time job or using your skills to do some extra work. At the same time, you look for ways to lower the interest rates on your current debts, like transferring high-interest credit card balances to a card with a lower rate for a while. Then, you use that extra income to pay down your debts and build your savings. With extra income, it's crucial to set a clear monthly savings goal. Decide what percentage or specific amount of your extra earnings you want to put towards your savings account. This makes it a deliberate part of your financial plan.
• Why It Works: Earning more money gives you more to put towards your debts and savings. Lowering your interest rates means more of your payments go towards the actual debt instead of just interest.
• Things to Think About: Taking on extra work takes time and energy, so make sure you can balance it with your other responsibilities. When you transfer a balance, make sure you have a plan to pay it off before the low-interest period ends. When setting your savings goal, make sure it's realistic within your extra income and doesn't leave you feeling overwhelmed.

Choosing the right way to tackle The Money Challenge depends on what works best for you. Some people like quick wins, while others are focused on saving the most money. Sometimes, people even use a mix of these ideas. The most important thing is to pick a plan, set achievable monthly savings goals within that plan, and stick with it to reach your goals of building savings and reducing debt. Remember, even small, consistent savings can make a big difference over time!

If you’d like assistance with a balance transfer or setting up savings account.  You can stop by one of our branch locations or reach out to our member service call center at 877-661-3300.

Additional resources:

GreenPath Financial Wellness, provides information on debt management and savings. Along with counseling on debt management.

Banzai Get Out of Debt Coach, is an online coach providing strategies to help create a plan to pay off debts.  Banzai also has many other resources for planning and saving.