America Saves Week 2023 – Day 4
WHAT IS AMERICA SAVES WEEK?
Since 2007 America Saves Week has been an annual celebration as well as a call to action for everyday Americans to commit to saving successfully. Through the support of thousands of participating organizations, together we encourage individuals to do a financial check-in that allows them to get a clear view of their finances, set savings goals, and create a plan to achieve them.
DURING THE WEEK, WE’LL BE FOCUSING ON THE FOLLOWING THEMES:
Monday, February 27, 2023 | Saving Automatically
Tuesday, February 28, 2023 | Saving for the Unexpected
Wednesday, March 1, 2023 | Saving for Major Milestones
Thursday, March 2, 2023 | Paying Down Debt is Saving
Friday, March 3, 2023 | Saving at Any Age
Paying Down Debt is Saving – Day 4
Have you started a new savings account this week? Maybe you are someone who is in the process of paying down debt and currently can’t put aside as much money as you would like…One of the greatest contributors to financial stress is debt. If you’re having a tough time financially, it can feel isolating, but the truth is 80 percent of Americans have consumer debt. The only way to relieve financial stress is to make a plan and work your way through it. But to make that plan, you’ll need to understand the type of debt you have, your best-case scenario to pay down your debt, and how to leverage your knowledge so that you can maintain or increase your credit score. This is a form of Saving! By paying down debt, your money is then free to be saved for things you want and need in the future.
PAYING IT OFF FOR GOOD STARTS WITH A DECISION
There are many strategies to use when working toward paying off your debt. The most popular strategies include the snowball method or the avalanche method. By deciding which method you want to use beforehand, you will reap the benefits of paying it off faster.
“Snowballing” your debt is a type of accelerated debt repayment plan. First, list all of your debts from the smallest balance to the largest balance. Next, make the minimum payment on all your debt except the smallest one. With your smallest debt, you will put as much money as you can toward the balance. Once the smallest debt is paid, take the amount you were putting towards that debt and apply it to the next smallest. With this method, interest rates are not the focus.
With the “avalanche” method, you will still make the minimum payments on every source of debt, but you apply the remaining funds toward the debt with the highest interest rate. By paying off the debt with the highest interest rate first, you reduce the overall amount of interest you pay.
Making extra payments allows you to pay off your loan(s) more quickly when paying toward installment loans, like your car payment. Just be sure to specify that any additional funds outside of your monthly payment go toward the principal. Before you begin making extra payments to installment loans, check the terms of your loan to determine whether additional fees or prepayment penalties may apply.
Regardless of how you decide to reduce your debt, starting today can help in the future!