How to Build Your Plan When You Have Debt and Savings

Balancing debt and savings can feel like trying to pat your head and rub your stomach at the same time – tricky, but totally doable.

“I guess I just feel a little anxious about the whole thing because I’m not a money person, I’m not a numbers person.” -Elisabet, Beans Member

 

Starting on the path to money + life balance can be intimidating at first. Balancing debt and savings can feel like trying to pat your head and rub your stomach at the same time – tricky, but totally doable. Beans member Elisabet knows this scenario all too well. Working as an educator in Virginia, she came to The Beans with student loans and credit card debt as well as some savings. Her eyes were set on building a Plan that included paying down this debt, building up her Essential Savings, and making regular contributions to help her mom with the mortgage. Challenge accepted! Let’s dive into how to build a Plan when juggling student loans, credit card debt, and savings. 

Start Simple

A Plan for your money doesn’t need to be complex or require hours to manage. Did you know that just by having a Plan chances of success are significantly increased? Yes, individuals with plans are ten times more likely to succeed. Planning helps clarify priorities and enhances the likelihood of accomplishing key tasks. 

We’re partial to using The Beans app to get started. We make it easy to track fixed expenses and income, but you can also do this with pen and paper. Once you have a grasp on what’s coming in and what’s going out the next step is to look at savings.

Attainable Savings

Having an “emergency fund” is a common and popular concept when talking about how much to save. Many will recommend six months’ worth of living expenses and while that is an admirable goal, it’s not a realistic place to start. It is also not necessary. The fact is just a couple hundred dollars in savings will positively impact your day-to-day financial decision-making. At The Beans, we encourage a much more attainable Essential Savings of $2500. With $2500 in savings, you are insulated from most economic shocks so you can bounce back quickly when something comes up. 

“So when I have this extra money, it’s like, oh, okay, so let me save it and hoard it and not even think about that being there and being able to spend it.” 

Elisabet’s sentiment is not uncommon, however, when you have debt, especially high-interest debt like from credit cards, your savings will never be able to outpace your high-interest debt. In Elisabet’s case, this meant a one-time draw down of her savings to pay off the high-interest credit cards and that is OK. Her Plan includes a monthly contribution to build that savings back up over time.

Taking this bold move saves Elisabet $750 in unnecessary interest payments, will improve her sleep quality, and free up the money that was going to minimum payments for joys and other priorities! 

Do More of What Matters

“I want to take care of those that I love. But I also have to think about me at some point.”

You want to take care of them and you want to take care of you. And guess what? You’re in a place to do that because you are making good decisions for yourself! At The Beans, we believe in spending intentionally and research shows that when you spend money on something that you value you actually get more utility per dollar. For Elisabet, this looks like contributing to her mother’s mortgage. Whether your spending is on family, friends, experiences, or food, it doesn’t matter. Build your plan with your values and intentions in mind. 

A Plan for your money is within reach. Remember to keep it simple, allow for joy, and build your Essential Savings. Just like Elisabet, you can take control of your money and experience more joy.