Navigating Debt and Savings: How one healthcare professional is moving closer to homeownership

Understanding what money is coming in and what is tied up in commitments to others is the foundation of your Plan.

“I think the biggest change I’ve had in the last few months is getting an actual plan set and making it realistic where I’m still able to spend money like I need to and not constantly feel like I have nothing.” -Amanda

Amanda has a goal. She wants to purchase a home and she’s been fiercely building up savings for a down payment. Like many hard-working healthcare professionals, she is carrying a good bit of student loan debt. She’s also juggling a car loan and credit card debt. How can Amanda create a Plan that continues to build savings while also paying down debt? Let’s dive in.

Get the full picture

The first step is to know where your money is going. There are fixed expenses like rent and utilities and then there are flexible expenses like groceries and a new pair of shoes. Also, outline your debt. FYI- all debt isn’t equal. Student loans generally carry a much lower interest rate than credit cards and can qualify for complete forgiveness when you work in a caring profession. Car loans are somewhere in between. Understanding what money is coming in and what is tied up in commitments to others is the foundation of your Plan.

Snowball it

The snowball method is an evidence-based strategy to pay off your debt. It works by paying off the smallest amount of debt first, then moving on to the next smallest amount, and so on. Why snowball? Research shows that individuals are more motivated to get out of debt when using the debt snowball method, and motivation is momentum! It’s priceless so we want to cultivate it every chance we have. The snowball method creates an opportunity to celebrate each milestone and take that momentum to the next challenge. 

It’s important to know that not all debt is created equal. With her sights set on buying a home, Amanda will focus her snowball efforts on paying off credit card debt and car loan because her student loans are on track for forgiveness and do not weigh as heavily on her candidacy for a mortgage.

Automate to make more progress

Ever notice your to-do list shrinks quickly when it’s made up of “easy” tasks? That is because there is little or no “friction”. Friction is an obstacle or hurdle that increases the effort or motivation needed to complete a task. Automation is the answer to friction. By automating her monthly savings contributions Amanda will continue to make progress toward her dream of owning her own home. 

Amanda’s journey toward homeownership is a testament to her dedication. After looking at her full financial picture Amanda will utilize the snowball method to pay down her credit card debts and car loan and automate her savings so she can continue to contribute to her mortgage down payment. Through these steps, Amanda is actively shaping her future and reducing her financial stress.