How to pay off your debt and grow your savings in 2024
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This has been an incredibly challenging year for finances in the United States.
Credit card debt surpassed a record $1 trillion in 2023. Shoppers struggled with inflated prices throughout the grocery store. Most Americans are living paycheck to paycheck.
“It has been very hard,” admitted Kyra Williams, a Downtown Memphis resident and young mother of one-year-old Cairo. “I work 40 hours a week. I have to take care of him. I have to take care of myself.”
“It’s been pretty difficult,” said Owen Wright, an East Memphis resident. “I’ll be honest, I’ve been working two jobs basically the whole year. And really, this is the first week throughout the whole year, I can say that I have a decent surplus.”
The rising costs of rent, food and fuel are the primary reasons why it’s so critical to plan financially for the new year.
“We’re all setting New Year resolutions,” said Travis Moody, the CEO of Forward Memphis.
Moody and his wife were able to pay off $100,000 in just three years. Now, the Memphis native and Hamilton High graduate helps counsel others in emergency financial situations.
“It was loans and credit cards,” he said. “We were very aggressive, but once we paid it off, that’s such a good feeling.”
Build emergency savings
Moody advises setting aside whatever you can afford each paycheck, even just $5 or $10. With time, it will grow.
“We recommend starting with your emergency fund, even before starting to pay off your debt,” Moody said.
When you build that emergency fund, you won’t have to borrow from family members or predatory payday lenders with sky-high interest rates.
“When we’re able to save, it gives us power,” said Felecia Walker, the Memphis author of “Paid on Friday, Broke by Tuesday.”
Earlier in the year, she told FOX13, she started growing her savings by automatically distributing $25 from her paycheck into an account that she could not easily access.
“When we’re able to save, it gives us power,” she said. “It gives us confidence that if I can save $500, I can do anything.”
Rethink current expenses
This is where it can get challenging. Moody recommends an honest audit of the expenses that are not necessary right now in your life. You won’t have to give them up forever, but a short break can help you get the money you need right now.
“Stick to the basics,” Moody advises.
Forward Memphis launched a “no-spend challenge” for January. For those who want to reset their finances, Moody recommends cooking inside for your family whenever possible.
“We pay our necessities, but we cut out all discretionary spending,” he advises.
At the end of the month, he said you can use the savings to build your emergency fund or pay off debt.
Pay down debt
Now is the time to assess the money you owe, whether it’s through credit card debt or personal loans.
“I think the starting place is to understand how much damage we have done,” Moody said. “We need to get a list of how much debt we owe so that we can begin setting a plan for paying it off.”
Learn which of your debt has the highest interest. Work on throwing as much money as possible at that debt first. Paying it off early could save you thousands of dollars in interest.
While these financial plans require sacrifice in the short term, proper financial planning can pay off for your household and all future generations in the long term.
“This is the right time to have a temporary sacrifice so that we can have some freedom,” Moody said.
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