
Consulting with a financial professional can help put consumers on the right path, but here are some proven steps that can help you save while paying off debt:
Establish an emergency fund. Put at least $1,000 into a savings account to use for unexpected emergencies, like car repairs, medical expenses, and other expenses. When a genuine emergency does occur, the money may mean you don’t have to reach for a credit card to cover the expense.
Build a budget. There are several simple steps to follow to create an accurate budget:
1. Figure out exactly what is coming in each month; calculate each expense to figure out the monthly outlay. Don’t forget to include what’s spent on groceries and services, like babysitting, dry cleaning, gas and transportation.
2. Compare the money coming in to the amount going out. Whatever surplus cash you have after the bills are paid is to be applied to paying off debt while saving for an emergency.
3. Budgeting tools that may be helpful:
A notebook – This old-school approach may still be the best. Record monthly income at the top of a page and subtract itemized expenses.
Office Online – Categorize expenses with this online program with several free personal budget and organizing tools.
Mint – An online resource that can help put household budgets on track using a desktop or a device.
Decide Where to Put Extra Money
Before applying all extra money to savings, consider the cost of carrying credit card balances month after month. The average credit card interest rate is about 15.18%. Savings accounts interest rates, meanwhile, hover around 1%.This means carrying credit card debt while having savings in the bank actually costs consumers 14% each month. This is not to say consumers shouldn’t save, but a “savings only” approach can cost money. Keep this in mind while deciding whether to pay off debt while saving.
Remember: Numbers don’t lie. Mathematically speaking, it makes more sense to pay down debt while building an initial emergency fund. Once an initial fund is established, then you can increase the amount that goes to credit card debt. Once the high-interest debt is paid off, apply the funds to aggressively save going forward.

How to Save While Paying Off Debt
Smart consumers don’t plan to start saving for the future “someday.” Instead, they create a plan to maximize debt-paying strategies right now while saving:Take full advantage of an employer-match for a 401(k) plan and contribute the full amount to receive the full match.
Plan and save for big purchases, like an automobile, refrigerator or home upgrade. This gives you a larger down payment, resulting in a more attractive interest rate.
Cancel unnecessary credit cards and be sure to contact card issuers and tell them you are closing the account. This can help improve a credit score.
Keep one or two credit cards for emergencies and select those that offer the best interest rates. Make a commitment to pay cash for monthly expenses.
Trim lifestyle expenses in order to put money aside or add extra cash to savings
Stop eating out. Busy people are tempted to order takeout or have pizza delivered, but the costs can add up and damage a well-planned budget. If dining out is “necessary”, plan monthly or bi-monthly outings and be sure to include them in the budget
Slash the entertainment budget. First-run movies, happy hours, pedicures and other unnecessary expenses should be on the chopping block until savings and debt-paying goals have been achieved
Learn to love camping. Fancy vacations can be put on hold until consumers have reached financial goals from paying off debt while saving. Inexpensive weekend trips or staycations can be just as fun and less costly.
Do you really need premium channels? The answer is probably no. Choose to save for retirement or pay off debt instead of paying for expensive services.
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