So, can you build your wealth while paying off debt? The short answer to that question is yes!
Paying off your debt and building your wealth simultaneously may seem like a mammoth task, but it isn’t entirely impossible. Whether it’s paying off your student loans or getting rid of your consumer debt, with a little bit of planning and reassessment of your financial targets, you can hit off some of your savings goals and still grow your nest egg for retirement.
It may take some time, but starting sooner than later will definitely work in your favor.
Pay Off Your Debt While Still Building Your Wealth
Debt and wealth do not need to be mutually exclusive. While life does not deal with us all with the same set of cards, once you can discover the strategies that work best for you, you can pay off your debt and still be able to achieve your financial goals.
Get Intimate With Your Finances
The numbers may be daunting, but you must know what you’re working with. The first step when deciding to improve your financial health is to sit down and thoroughly understand your current financial situation. How much do you earn? How much do you owe? Are you budgeting efficiently?
If you can, point out aspects of your finances you can control. Usually, these happen to be things you spend on. Maybe you have some subscriptions you don’t utilize, or you may be overpaying for some bills or other expenses. Remember that doing this exercise is not to shame you for buying that extra cup of coffee you had yesterday or for paying for your streaming services. You are here to get rid of debt, not to get rid of things that give you joy.
Define the different types of debt you have and figure out how much you need to pay off your debt monthly. Is that number feasible with your current income? Can you afford to pay more than the monthly minimum? How about your savings and retirement fund goals? Can you maintain or raise your contributions? A simple yes or no to those questions is enough for now as you then figure out the best strategies to move forward.
Can You Increase Your Income?
Sometimes, the problem isn’t your budget but how much you bring in. If you find that you’re already doing everything you can to stretch your dollar and still living paycheck to paycheck, the next step is to figure out how to increase your income.
If a salary raise or a promotion is available, talk to your higher-ups. Negotiating for better pay can help you get a better footing with your finances since now you have more money coming in that can help you tackle your debt and also have enough to save and invest. And if you already have too much on your plate and a side hustle is not possible, a pay raise is the most straightforward way to increase your income.
You can also look for another job that offers better pay. According to Monster, job-hopping at the right time can significantly boost your salary. Your new job can also have better benefits like a higher employer’s match to your 401k contributions, which can help you grow your nest egg for retirement.
However, if those two options aren’t applicable, assess if you can take on another job or a side hustle that can supplement your current income. It may be challenging, but if you can do it, you can have more wiggle room to take care of your daily needs while paying off your debt and contributing to your savings and investments.
Establishing Short-Term Goals
According to The People’s Federal Credit Union, successful wealth accumulation and debt reduction can be possible by setting short-term goals that snowball into long-term ones. These goals must be attainable, specific, and reachable to set yourself up for success.
Set a goal to save $500 in three months, then double that savings goal over and over until you can establish a longer-term goal, like establishing an emergency savings fund that can help you weather any unexpected financial curveballs.
When paying off your debt, you can approach it slowly and steadily by paying your monthly minimum while focusing on your savings goals, but you can also take more proactive measures.
If there are any lower balances or shorter-term debts, you can choose to make extra payments on those when possible to knock them down sooner. You can also make higher payments on all your debts, so you can pay your larger balances down faster and get rid of your lower balances quicker.
Personalize Your Financial Plans and Budgets
To have a clearer picture of your money’s flow in and out of your accounts, create a mindful spending plan that can be as immediate as a weekly or as future-oriented as a yearly plan. This also helps ease any anxieties you may have with other fees, taxes, or other dues you tend to forget as you focus on more immediate financial matters.
Work on creating a budget that makes achieving your goals easier. There are many different budgeting styles and methods, and sometimes it may take some trial and error, but work out a budget that fits best with your lifestyle. If you can, seek the help of a financial advisor.
Final Thoughts
Managing your finances may be daunting at first and isn’t always easy, but as you educate yourself more and practice what you learn, you can make small changes that will greatly benefit you later on.
Don’t fall for the pressure of someone else’s money timeline and instead focus on what you can control. What is important is you are taking proactive measures in your financial journey that will accumulate over time and give you significant returns on investment.
