Millions of Americans
are currently struggling with high levels of debt. These Americans are also
being told that they need to have a significant amount of money in their
savings accounts. Having high savings totals means that they will be better
prepared if they face an unexpected expense. They may be able to avoid going
further into debt if such an expense arises. These individuals have to plan and
work carefully to ensure that they are properly balancing debt payments and
savings.
Use debt repayment techniques
One of the first steps to balancing debt payments and savings is to bring the debt payments as low as possible. There are many different ways to do this. One is through the process of debt laddering. Debt laddering involves structuring debt payments so that an individual pays off all of their debts with the highest interest rates first. Individuals can also embrace personal loans and repayment plans. Personal loans consist of a large sum of money at a low interest rate that an individual can use to pay off their debts with higher interest rates. Repayment plans are sometimes offered by student loan groups and the IRS to help individuals pay off their debts over a period of time under certain circumstances. Individuals in debt can work closely with companies such as Mountain Ridge Associates to determine which personal loans and repayment plans will work best for them.
Set a savings goal
Once an individual has reduced their debt payments, they should focus on setting and meeting a savings goal. Individuals will often not be able to save if they do not have a budget and set a bare minimum to save every month. This amount should be high enough to meet goals such as saving for an emergency fund, contributing to retirement, or meeting an upcoming large purchase. But the amount saved should not be so high that an individual cannot adequately pay their debts. A few hours of calculations and income projections from a financial adviser, or counseling from experts such as Mountain Ridge Associates, can help an individual determine the best possible savings goal to set.
Embrace accounts with high interest rates
Many individuals do not put their savings to work like they should. In many cases, they use the same large bank for savings and checking accounts. Individuals focus on what they know and are familiar with when it comes to banking decisions. Sometimes, these accounts can have considerable costs and requirements to avoid more fees. They may have savings rates that do not even keep up with the pace of inflation over time. Instead of continuing with these accounts, individuals need to shop around for the best possible rates when they determine where to place their savings.
Some online savings accounts provide five times the interest rates for their accounts than traditional banks. This added interest can make meeting savings goals slightly easier for a large number of families. There are also few trade-offs for a traditional savings account because most people do not need a face-to-face interaction with their savings funds. They usually only make periodic withdrawals and deposits which are made easy by the interfaces of most online savings accounts.
Conclusion
Balancing debt and savings can be a difficult task for any household. The difficulty of this task is compounded by the many unexpected expenses that every household faces over the course of a year. Setting goals and working with investment partners are essential to ensuring that families save as much as they can and pay off their debts as quickly as possible.