From Debt to Savings: Step-by-Step Guide to Start Your Money Saving Plan

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If you’re looking to pay off your debt and build up your savings, the best place to start is creating a solid money saving plan. Keep reading to learn 10 powerful steps that will help you start a money saving plan and make the transition from debt to savings.

Welcome to part 3 of 10 in my personal finance blog series, where we dive into how a money saving plan can be your key to successfully transitioning from debt to savings. If you’re just joining us, be sure to check out the first post for a deeper dive into why a money saving plan is so crucial. It’ll lay the foundation for everything we’re discussing moving forward.

If you’re ready to take the leap from debt to savings, or have been struggling with your current money saving plan, look no further. In this post, we’re going to break down the 10 key steps that you can take to build a solid money saving plan and finally create the financial future you envision for yourself.

Psst! The strategy I’m getting ready to share is exactly what helped me pay off my $12,000 loan in just 6 months and stay debt-free ever since. The best part? I’ve already done the hard work of perfecting this approach—so all you have to do is relax and absorb it. I’m excited to see how this can help you, too, get on the debt-free train. You’ve got this!

10 Powerful Steps to Transition from Debt to Savings

Making the leap from debt to savings is no small feat. It takes a lot of hard work and discipline to effectively stay debt-free and build up a healthy savings. But beyond that, it’s extremely important to have a strategy in place for how you plan to pay off your debt and build your savings. This is what we call a money saving plan. Now, money saving challenges are a great way to ease into building your savings. However, what’s really going to set you up for success and help you hit your financial goals is having a solid, end-to-end money saving plan. One that strategically takes into account your entire financial situation, both where you are now and where you want to be down the line.

If this is your first time hearing of a money saving plan, I highly recommend starting out reading why a money saving plan is so important, followed by understanding what exactly a money saving plan is. If you already have a money saving plan but are looking for ways to strengthen it, you’ve come to the right place. Keep reading to learn step-by-step how you can build a solid money saving plan for yourself.

Step 1: Assess Your Current Financial Situation

Before you start making big changes, it’s important to assess your current financial situation and figure out where you stand. Take a look at how much you’re bringing in each month, your monthly expenses, any outstanding debts, and any savings you currently have. I know this can be a little daunting, but this step is so so important—it’ll give you the foundation you need to create a realistic budget and start setting some financial goals (two key steps that we’re getting ready to cover below). Once you’ve assessed your situation, you’re ready for step 2!

Step 2: Identify Areas for Improvement

After reviewing your finances, identify exactly what areas of your finances you can and want to improve. This is important to know as we move into the next few steps. Think about…

• Do you want to cut back on unnecessary spending, like online shopping, dining out, impulse purchases, or monthly subscriptions?
• Do you want to save more toward your emergency fund?
• Do you want to save more toward your retirement?
• Do you want to put more money toward your debt payments?
• Do you want to invest and make your money work for you?

Once you’ve identified at least one area for improving your finances, proceed with the next step.

Step 3: Set Savings Goals and Prioritize

Alright, it’s goal setting time. My friends, do not skip this step! This is where the magic happens. Setting clear savings goals and prioritizing what you want to save for is a crucial part of developing your money saving plan. Having goals for yourself gives you something to track progress toward and allows you to see just how far you’ve come 3-6 months down the road as you’re actively saving. The best way to set clear goals is by following the SMART goals strategy: Specific, Measurable, Achievable, Relevant, and Time-bound. Start by identifying 3-5 short term goals and 2-3 long term goals.

For those who are on the verge of paying off their debt or are debt-free, remember that it is still just as important to set financial goals and save money as if you were still in debt. Consider new savings goals like building a 6-month emergency fund or healthy retirement savings. Investing in your future self is very important so you can live comfortably later on, just as you may be living now. Think about the lifestyle you want to have when you are older and put a plan in place now that will allow you to get there.

Step 4: Create a Realistic Budget

Budgeting is all about tracking your income against your expenses, no matter how small, and making sure you leave enough wiggle room for the lifestyle you want—all while avoiding overspending. Ask yourself: Where is my money going? Are my spending habits helping me stick to my budget? And do they align with my financial goals?

Keep in mind that everyone’s budget is going to be entirely unique to their financial situation and lifestyle. There is no “one-size-fits-all” approach. So, instead of stressing over trying to make your budget look like someone else’s—whether it’s your best friend’s or that picture-perfect one you saw on social media—focus on what works best for you. Moreover, make sure it is sustainable and appropriate for your financial situation, that way you don’t get overwhelmed nor tempted to give up within the first couple months.

When you’re getting your budget set up, use these smart tips for organizing your personal budget, including what budget categories to consider per your income and expenses. Once you’ve got that all squared away, a common rule of thumb for budgeting is to divvy up and allocate a percentage of your income among 3 categories: Needs 50%, Wants 30% and Savings 20%. If necessary, modify each % according to your financial situation. For example, if your needs account for 60% of your income, reduce your wants to 20%. In this case, your budget would look like Needs 60%, Wants 20%, Savings 20%. Again, there is no one-size-fits-all.

Step 7: Automate Savings and Payments

I don’t know about you, but I like anything that makes my life easier–especially my finances. To do just that, set up automatic payments toward your savings and debt. Treat your savings just like your bills–but instead of paying someone else, you’re paying YOU (your future self). This way, when your paycheck comes in, a portion automatically gets sent to your savings account (or to pay off debt). It’s out of sight, out of mind, and you won’t have to stress about it. Eventually, you won’t even notice it, and you’ll be building savings without even thinking about it! Something as simple as automating your finances can not only take a huge weight off your chest, but it will ultimately help you stay on track and consistent with your financial goals.

Step 8: Organize Your Finances

Organizing your finances from the start is one of the easiest ways to simplify your finances. If you’ve been following the steps in this post, you’re already 90% of the way there! But to really make all your work worthwhile, you want to make sure you’re staying organized. Leverage the following tools to maintain control over your finances and stay on track for years to come:

• Budgeting planners are an effective tool for managing your finances. A handheld budgeting planner like this one helps you document your goals, track daily expenses, and map out your finance strategy (like how you’ll leverage this money saving plan). It even comes with cute stickers which, if you ask me, stickers make anything WAY more fun.
• File organizers are a great method for keeping things like medical bills, receipts, and other important tax documents tidy and easy to access. To maximize desk space, opt for a multi-functional file organizer like this one. Or, if you’re thinking “Allie, I don’t want another thing on my desk,” these wall file organizers do the same job and are super easy to hang up.
• Personal finance apps make managing finances on-the-go super easy. Most banks and credit card providers have mobile apps, but you can also use apps like You Need a Budget (YNAB), GoodBudget, Monarch Money, and Every Dollar. Some, like Every Dollar, even let you connect your bank account for seamless tracking.

Step 9: Track Your Progress

This step is all about keeping an eye on your financial progress to ensure you’re staying on track with the goals we set in Step 3. It also works hand-in-hand with Step 10, which we’ll dive into next. By regularly monitoring your progress, you’ll start to notice your own personal financial trends, like the categories where you save or spend the most. This insight helps you determine whether you’re making great strides toward your goals or if you need to make adjustments to get back on track.

Tracking your progress is about more than just reaching a goal though. It’s about recognizing how far you’ve come, celebrating even the small wins, and staying motivated as you move toward your next financial milestone. It’s easy to feel like you’re not doing enough or that progress is slow. But tracking your progress gives you a tangible way to visualize your efforts and serves as the perfect reminder that you are making great strides and working hard toward your goals. Remember, you’ve got this!

Step 10: Reassess Your Budget Regularly

We made it to the last step guys, yay! For this last step, I want to emphasize the need for reassessing your budget regularly. This is your opportunity to ensure that overtime, everything you’ve worked so hard to plan out is continuing to push you toward the financial future that you envision for yourself. A common misconception when it comes to budgeting is thinking that once you establish a budget, you need to be locked into that budget. However, your financial situation and priorities in life are naturally going to evolve over time. So it only makes sense that your budget evolves with it.

Think about it. If you’re working toward a down payment on a house, you might want to dedicate more money to your savings. Or maybe you’ve paid off a big chunk of debt and now you can start investing. Whatever the case, reassess and make sure your plan is evolving with your goals. The more you reassess, the more control you have over your finances and the more prepared you are to handle any financial obstacles that come your way.

Phew! Let’s recap.

While trying to get out of debt can feel overwhelming or even impossible at times, committing to a solid money saving plan can be all it takes to get on the debt-free train. I encourage you to start with at least one of these 10 key steps, and you’ll soon see just how powerful a focused plan can be. If you need more clarity on any of the steps, feel free to drop a comment below!

Next up in the blog series

Next up is part 4, where you’ll learn how to set realistic, achievable financial goals that’ll keep you motivated—because let’s be real, without motivation, the results you’re after can be hard to achieve.

Tell Us Your Story!

What debt challenges do you face and how have these tips helped you? I’d love to hear your experience, drop a comment below!