QUESTION: How to save if you have loans?

Having loans often makes people completely abandon the formation of savings, but this approach is not optimal from the point of view of financial security. The first step in a difficult debt situation should be the creation of a small financial safety cushion. It is recommended to save an amount equal to at least one month of your mandatory expenses to protect yourself from unforeseen situations like job loss or illness.

As soon as the minimum reserve is formed, it is necessary to declare the fight against the most expensive debts a priority. Credit cards and consumer loans at high interest rates eat up a significant portion of your budget, so early repayment of these particular obligations brings the greatest savings. Direct all free funds to closing these loans while trying not to take on new borrowings.

After the debt burden decreases significantly and only large or preferential loans remain, you can gradually return to classical budget planning. Try to bring the share of regular savings to 10–20 percent of your monthly income. This approach will allow you to simultaneously get rid of financial bondage and build capital for future investments and major purchases.