How Can I Save Money While I’m in Debt?

18 experts offer their advice on how to kickstart your saving strategy.

Most of us have debt, even if we’re working towards a debt-free lifestyle. It’s a bummer to have to pay down that debt every month and never save any money. Savings can’t wait for you to become debt-free. If you want to stop living paycheck-to-paycheck, you need to start saving now.

With that in mind, we asked 18 experts this question: How can people save money while they’re in debt?

Here’s what they said…

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Finder

#1 tip: Cut expenses just a little bit.

If you’re trying to save money while you’re in debt, pinpoint a few areas where your spending is out of control. It could be dining out, shopping, traveling or anything else. Then, find ways to trim your expenses in each category. For example, if you have multiple monthly subscriptions — Netflix, Hulu, gym, Birchbox — cancel the one you use the least. If you eat out three times a week, cut back to two times a week.

You don’t have to cut out everything cold turkey. In fact, that’s a sure-fire way to fall back into bad habits. Instead, look at each of your spending categories and find a way to save even $10 or $15 in each one.  These little expenses may not seem like much, but they add up to huge chunks of change over time.

I had no idea that I was spending $20 a month on unnecessary subscriptions and almost $100 a month on Amazon purchases. Cutting down on my expenses was one of the ways I managed to pay off $18k in student loan debt and save $1,000 in 10 months.

If you’re having trouble finding ways to trim down on unnecessary expenses, try a budgeting app that analyzes your spending habits. For example, there are apps that negotiate fees on your behalf, help you cancel unwanted subscriptions, round-up your spare change and more. Once you’ve reduced your expenses, open a high-yield savings account so you can start earning interest on your money.

Cassidy Horton

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DontPayFull

Should you save money or pay off debt? Both are critically important, but most people look at their budget and decide they can only do one or the other. However, with a different perspective and some discipline, it’s possible to do both.

Budget Like You Mean It

The key to a successful budget plan is prioritizing and tracking. It starts with a realistic goal, then finding the money to apply to the goal. Every dollar from your paycheck should be allocated to a spending category, then finding ways to save money within each category. If you spend more in a category than you budgeted, then you need to reduce spending in another category. Nothing should get in the way of achieving your spending target.

Set a Realistic Savings/Debt Target

Because interest on debt is higher than interest on savings, you may want to start with a bigger contribution to your debt. For example, you can begin with a 30/70 split between savings and debt payoff and then increase your savings when your debt reduction gets ahead of the target.

Pay Yourself First

The key to any successful budget is paying yourself first. If your monthly target is $600, you should immediately take that amount from your paychecks and apply them to your savings/debt target. Some employers allow for automatic transfers of a specific amount from each paycheck into a savings account.

Transfer Balances

If you credit is in good shape, you could consider a balance transfer to a credit card with zero or low interest rates. You’ll probably pay a transfer fee but, if the interest rate is substantially lower than your current cards, you’ll make up for the fee with a month or two of interest savings.

The key to this strategy is to maintain, or increase if you’re able, the monthly payment you were making on your old card. However, do not consider this strategy if you think you can’t pay the balance in full before the end of the promotional period or you may end up paying the default interest rate on the entire balance.

Richard Best

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Good Financial Cents

First of all, if you want to make a long-term savings plan, the first step is to always tackle debt before all else. Put as much as you can into paying off your debt, as being debt free will help your finances tremendously.

Secondly, the only way to tackle saving money and paying off debt at the same time is to establish a reliable budget you can stick to. Use something like a budget app or a spreadsheet to keep track of your expenses and then delegate your finances. You need to stay organized in order to pay for your necessary bills and expenses, make debt repayments, and put money into savings. Understand that unnecessary expenses will need to be cut out of your lifestyle to make this type of budget work, so be prepared to eat at home and skip trips to the movies for a little while. This short-term sacrifice will mean a long-term reward for your finances.

As I mentioned, you need to break down your expenses, debt, and what you want to put into savings when you budget. Aim to pay off your debt as quickly as possible, so prioritize making those payments. When you first start, put more money into your debt repayments than into savings. Over time, you can re-evaluate your finances and decide if you want to be putting more into savings every month than when you first started.

Jeff Rose

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Credit Card Insider

Determining whether saving or paying off debt makes the most sense can be difficult, and the answer depends entirely on your unique situation. I have one helpful tip in this respect.

If you’re carrying high-interest debt, like a big credit card balance, consider transferring that balance to a card with a 0% introductory balance transfer APR offer. These cards let you carry debt interest-free for a set period of time that often exceeds a year, and sometimes approaches two years.

The typical recommendation is to pay down debt before you save, because debt that incurs interest charges loses you unnecessary money in the long run. But if you can take advantage of a credit card with 0% APR, you can carry that balance without accumulating additional fees as long as you make the minimum monthly payment. This can give you a bit of breathing room to set aside money that would otherwise be funneled toward interest charges.

However, throughout the 0% APR period, you should still try to pay down the credit card balance so it’s either much lower or paid in full by the time the intro period ends and its full interest rate kicks in.

Sean Messier

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Wirefly

I recommend doing a regular self-audit of your finances that includes several steps, but is quick and easy.

The first is to make sure you are not carrying any large credit card balances that you’re being charged interest on that you have the ability to pay off. If you can pay it off, then go ahead and pay it off. If you can’t, and you’re paying interest, look into a 0% intro APR on balance transfers credit card.

The second step is to see if you’re paying too much for a monthly service like cell phone service, TV, or Internet. Wirefly.com offers a comparison engine for cell phone plans, TV, Internet, insurance, and more. The average Wirefly user saves 30% by switching their plan to another provider. Always make sure to compare prices for something online before you buy.

Third, take a look at your monthly subscriptions on your credit card. Many people sign up for some monthly delivery service like vitamins, or razors, or an online news website, and then they stop using the product but forget to cancel. You can do this yourself by spending 15 minutes scanning your credit card bill.

Fourth, sign up for a service like Mint or Betterment, which allow you to see a full picture of your finances. These services allow you to link your financial accounts including bank accounts, as well as loans and liabilities, so you can calculate your net worth in real time, and track your saving progress over time. You can set goals and alerts, and also take advantage of financial offers like credit cards that are tailored to your finances. The earlier you start investing, the better.

Fifth, Betterment has a tool that you can link to your checking account, and they use AI to determine how much money they can withdraw and automatically invest for you periodically. Alternatively, you can also set up a weekly or monthly fixed auto deposit amount. Betterment will also use their proprietary investing algorithm to put your money to use investing in stocks, bonds, and other securities automatically, if you so choose. This “robo advisor,” as it’s known, will rebalance your portfolio automatically, and makes sophisticated investing accessible even for people with little financial experience. Once you realize how easy it is to effectively invest your money without needing to sit down with a financial advisor, you’ll also be more inclined to spend less money on frivolous pursuits, when you know it could be put to work for you in mere minutes..

Logan Abbott

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FinanceBuzz

You may think that trying to save money while you’re in debt is a nonstarter, but what it really comes down to is what you’re saving for. High-interest debts can eat away at your savings, but there are still other things you might need to save for. An emergency fund is a great example. Even if you’re paying down debt, saving for an emergency is especially important so that you don’t rack up even more debt should an unforeseen expense arise.

If you’re in debt but need to save for something, save for it. While you should remain focused on paying down your high-interest debts, you don’t want to exacerbate your debt by using a credit card for something you could have saved up for. That will only keep the cycle of debt going. If it’s a long-term savings goal, figure out how much you need to save each month to hit your goal while you continue paying down your debt.

Matt Miczulski

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Money Done Right

If you have high-interest debt, then my number one tip is to pay off all your debt first before you start saving. Here’s why: the average “real” rate of return of a dollar invested in the stock market, which includes the impact of inflation, is roughly 8%.

However, if your debt has a higher interest rate than 8%, then you are technically losing money because your debt is accelerating faster than your savings are. If this is you, then it could make sense to put all of your free money towards paying off debt first before you start saving in any significant capacity.

If your debt is lower interest, such as student loans, then the #1 tip is to automate your savings. Set up an automatic deposit from your checking account to an investment account to occur every month on the day after you receive your paycheck.

That way, you are saving and investing without thinking about it.

Logan Allec

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Swift Salary

In my opinion, when it comes to saving money while in debt, the answer really depends on one thing: the interest rate of the debt in question.

If you’re dealing with high-interest consumer debt, I think it’s best to simply pay that debt off as quickly as possible, rather than worry about putting money in a savings account. Using all your extra income to pay off the debt will save you the most money in the long run as you’ll pay less in interest charges.

That being said, if you’re dealing with a lower interest rate debt, like a mortgage or student loan, it makes a bit more sense to put away some money in savings each month. At the very least, you should work on building an emergency fund of $1,000 or more while you’re paying off your debt. This will save you from having to resort to a credit card in the case of an emergency like job loss, car problems, or something else.

To make building your emergency fund as easy and painless as possible, set up an automatic deposit with your bank to ensure you hit your savings goal in a timely manner. It’s also a good idea to set up a budget to track your income and expenses.

Dylan Houlihan

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Money Smart Guides

While getting out of debt is important, you shouldn’t sacrifice saving something every month just to get out of debt faster. You need to have the cushion of savings to be ready for what life throws at you.

My #1 tip to saving money when in debt is to save your savings. What I mean by this is when you buy something on sale and save money, make it a point to transfer that savings to a savings account. In other words, actually save it.

By leaving the savings in your checking account, you will only end up spending it eventually. By moving the money to a savings account, you ensure your cushion grows.

And most places will print on the receipt how much you saved. All you have to do is make the transfer when you get home.

Jon Dulin

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Mom Beach

When you are in debt, it is important to develop a family budget. Go through your past expenses and see where you can trim the fat. Are you spending too much on eating out? Make a plan to only eat at home.

My biggest tip for saving money is using money saving apps like Receipt Hog, Ibotta, and GetUpside. These apps allow you to get cash back on everyday purchases by scanning in your receipt. Receipt Hog pays the most money and sends your cash the fastest out of every cashback app I have tried.

Other ways that you can save money is by using the Trim personal finance bot. The Trim bot tells you about other service providers that cost less. You can switch to them and save money each month.

Becky Beach

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Urbanette

Switch to a plant-based diet. It’ll save you money and make you feel healthier. Oh, and it’ll help save animals and the planet! Win-win-win!

Angela Davis

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Family Focus Blog

I figure that even if you are in debt and owe money, you still have to save at least a little so you have a cushion for unexpected expenses. I suggest putting away $50 every week or every month, depending on what you can afford, and creating a minimum of two months’ rent cushion.

Scarlet Paolicchi

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Gen Y Planning

Move your savings to a high yield online bank like Ally or Marcus, and set up an automatic weekly contribution from your checking to your savings. By having a little money drip out of your checking account every week, you won’t miss it much, but your savings will slowly build and be there for when you need it most.

Sophia Bera

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That Bald Chick

My #1 tip for saving money despite being in debt would be to make savings automatic. You are less likely to spend it if it’s unseen. 😉

Virginia Higgins

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She Might Be Loved

I’d say money-saving apps like Cleo. With Cleo, it works out how much you can afford to put away weekly without missing the money. Even if it’s a couple dollars, it all adds up! I’m also a huge fan of TopCashBack; whatever you do have to buy, make sure you get discount codes, an offer, some kind of savings and then free cash back on top of that!

Georgina Grogan

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MoneyLifeWax

Automate your savings, manually pay your debt. The key to paying off your debt is to pay extra, and doing that manually is a strategic way to make sure you’re always getting the most out of your extra payments. That being said, some people want to also save at the same time. And the best way to save while paying off debt is to automate it.

Simply set up your direct deposit so that a percentage of your check automatically goes to savings. You will quickly adjust your lifestyle to meet your finances and save without even knowing it! Set a goal to
increase your savings each month by 1%, and do that for a year!

Josh Hastings

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Sparkly Shoes and Sweatdrops

We switched to borrowing audiobooks from the library instead of a paid monthly subscription. We started buying imperfect produce from the grocery store. We cancelled recurring charges for services we could live without, but we kept things where savings would be small and impact on quality of life would be great.

Alison Tedford

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Paradigm Wealth Partners

Debt is crippling, and can take years and years to overcome if you don’t have a strategy to get out of it. However, it is important to save money. After all, there is a reason Albert Einstein was said to have called compound interest the Eighth Wonder of the World. Compound growth is a fascinating phenomenon and can help in pursuit of financial independence.

I recommend that clients build up a $1,000 emergency fund, and then start tackling their debt using the debt snowball. The debt snowball lists all your debts from smallest to largest. You make the minimum payment on these debts, except for the smallest amount. You apply as much money as you can to that small debt until it is paid off, and then you move to the next debt.

I also recommend that people contribute to their 401(k), at least up to the match amount. That way, they are harnessing the power of compound growth, plus receiving the match from their employer, while at the same time working their debt snowball to become debt free.

Jonathan Bednar

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