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How to save while paying off debt

You can save while paying off debt.

However difficult it is possible the save while paying off debt. Many have little comprehension of the benefits provided by certain types of accounts, and together with a propensity to consume, this can lead them to delay, diminish, or disregard saving. Don’t.

There are a variety of ways individuals can benefit by being especially cognizant and diligent about developing the habit to save while paying off debt and investing early in life:

  • A safety net is built. Murphy’s Law holds that “anything that can go wrong will go wrong.” It may not be healthy to have such a pessimistic outlook on life, but when it comes to building a healthy future, the best course of action is to proceed with caution. Recent history is a testament to what can happen, and if there is one lesson to take away from the economic crisis, it is that shocks to the financial system can have a devastating impact on the personal fortunes of anyone and everyone. A safety net can serve as a buffer against unexpected lifestyle changes and cataclysmic events.
  • Wealth is created through investing. Over time, the stock market has proved to be one of the greatest ways for individuals to build wealth, but it’s necessary to have savings in order to build wealth through investing. Nearly everyone would like to be financially secure—and investing is one of the best ways to accomplish this goal—but it is saving continually over time that provides the required capital.
  • A time advantage is secured. Albert Einstein reportedly referred to compound interest and its ability to help investments grow by reinvesting the proceeds as the most powerful force in the world. Though we can’t be sure he actually said that, he certainly would have been right to: The power of compounding and the time to ride out market swings are what allow younger investors to take either more risk (in hopes of a greater return) or less risk (and still achieve the same goals) than older investors.
  • Experience is developed. One doesn’t become a proficient saver or investor overnight. It takes time to build the financial discipline necessary to save when you can, and the same goes for building the analytical skills needed to estimate the value of a security or to distinguish a mispriced asset from one with limited growth prospects. Younger investors have an advantage by starting early and building their skills over the long term.

Saving is important. It can help us to become financially secure and provide a safety net in case of emergencies or unforeseen circumstances. With the rising cost of living and a high unemployment rate, it can seem easier to borrow than save.

“All of us need a savings account for access to contingency funds for unforeseen dilemmas,” says independent debt counsellor Renée Marais.

“These contingency funds are an additional savings account that you have control over.”

Tips for beginners

Some examples of savings accounts that credit providers offer include:

These savings accounts can be used to cover added costs that are outside of your monthly budget, such as payments to cover your medical aid shortfall, your yearly vehicle registration, maintenance on your vehicle or to save for a holiday.

Marais advises that these savings should be made with discipline every month and should be at least 10% of your gross salary/ income per month.

Savings vs. debt

Whereas saving is a choice, debt repayment is a contractual obligation between you and your credit providers.

“If you enter into a contract with any credit provider, they are acting in good faith in advancing you money, and you have an obligation to repay it,” says Marais.

The National Credit Act, established in 2007, also advocates that you need to pay your living expenses, and that what is left over should be utilised for debt repayment.

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