Ask Samantha: How do I transition from owing money to saving it?

At one point or another most of us have been, currently are, or will be facing some amount of debt.  It’s yet another fun aspect of adulting, and can also be a real financial barrier if it’s not manageable.

*photo from Pixabay

The dream is always to move out of debt if at all possible, and into a situation where money is being saved rather than spent.  Obviously that is easier said then done, so we thought we’d check back in with our financial guru Samantha Brookes to see what advice she can provide on this stressful subject.

Samantha Brookes is the CEO and Founder Mortgages of Canada, one of the fastest growing and most reliable mortgage brokerages in the country. Samantha will be releasing her first book entitled, “Cash is Queen: 11 Life-altering Wealth Principles for Entrepreneurs & Trailblazers” where she will share her insights and tips to help anyone understand the game-changing “cash is queen” philosophy that will help adjust your mindset, remove uncertainty, and learn the “how’s” of creating your success through adapting the 11 life-altering wealth principles Samantha has used in her own life.

So we asked Samantha, “What do we need to do first? Pay off debt or save for the future?

Well here’s the answer that will shock you—and the answer is, you need to do both!  

North Americans have become so conditioned with carrying debt that even once a debit is paid, they find something else to spend on credit instead of setting it aside for savings or that rainy day. We feel we don’t have any other option than to borrow money because buying a large ticket item such as a car, a home or even tuition for an education is out of reach and unrealistic for most of us. 

The thing is, if something out of the ordinary happens, we could be left in financial turmoil. The need to take an honest look at spending activities within your bank accounts is a must. An assessment of the income, expenses and the unnecessary slow drips of unforgotten app fees can have you in the red. Stay on top of your spending and make it a top priority. Once you have assessed your finances, find areas where you can cut back, then put yourself on a budget.  The best method to do this is follow Senator Elizabeth Warrens popularized 50 / 30 / 20 rule. How this works is 50 percent of your net income will go to the necessities of living. Things like, food, housing, travel, utilities and clothing. 30 percent is for entertainment and 20 percent is for debt repayment and savings.  

Another way to be aggressive in saving money is to use cash!  Yes, cash! We have become so immune to swiping and tapping-on-the-go that we forget that money is a tangible asset and actually has value. Start allocating cash to your budget by using the jar system and you will find yourself saving at a rapid pace.

Now that we have that out of the way, let’s look at what should be the first plan of action. Do you have an emergency fund? If not, let’s start there.  How much of an emergency fund is realistic for a rainy day? Everyone’s lifestyle is different so this amount will depend on what some of your previous rainy days have looked like.  There is a method to this madness, stay with me. The reason we all need a rainy day fund is to avoid spending on your credit cards. If you think you will have a difficult time saving for your emergency fund perhaps increasing your income with a part-time job may help. Use those funds to create your emergency fund then once the emergency fund is completed start using the additional  funds to pay down debt and start saving.

Focus on the highest interest rate credit cards first, then the keep attacking the next debt with the highest interest and so on.

The sooner you start focusing on paying off debt and saving for retirement, the sooner you will be able to live a life full of abundance.

Got a question to Ask Samantha?  Tweet at us at @weraddicted and we’ll make sure she sees it!

Nadia Elkharadly

Nadia Elkharadly

Nadia Elkharadly is the Co-Founder and Managing Editor of Addicted Magazine. Her myriad of addictions include music, fashion, travel, technology, boxing and trying to make the world a better place. Nadia is also a feminist, an animal lover, and a neverending dreamer. Keep up with her on social media through @thenadiae.
Nadia Elkharadly