Just because you have bad credit in life, it doesn’t neccessarily mean you can’t have a set savings plan in check.  No matter if you’re $20,000 in the hole or you’re about to get yourself out of the debt hole, it never hurts to set a little money to the side for a rainy day.  Learn how you can create the perfect savings plan.

Step 1 – Pay necessary bills
The first thing we’re going to want to do is make sure that we pay all of the necessary bills each month.  This is going to include your mortgage, phone line, cable TV, etc.  Always make this your number one priority so that you can avoid debt with these companies.

Step 2 – Pay off debts
Now, I know we’re talking about a savings plan but we’re going to want to pay off your debts as well.  Since, we also want to enjoy life, my rule of thumb is to take the money you have leftover and put 75% toward your debts.  This way, you’ll have 25% left over.

Step 3 – Take 10% into savings
As I mentioned in the previous step, you’ll want to have 25% leftover.  This money is going to be your lesiure/saving funds.  Take this 10% and put it into a high yield money market account.  This way you’re collecting a higher percentage compared to a regular savings account.  Look into FDIC insured banks such as HSBC are offering high yield savings account.  

Now by following the steps above, I’ll give you a good example at what your plan should look like.  Let’s say you have $20,000 in credit card debt and you’re making $3,000 a month.  Let’s put the steps into work.

  • Mortgage / Phone / Car, etc – $1,500/month (this leaves us with $1,500)
  • Take 75% of $1,500 for credit card debt – $1125 / month
  • Leisure money – $375 ($93/week for entertainment)
  • Savings – $37.50 x 12 months = $450 x 3.75% APY = $466.88

Now, I know this doesn’t sound like a lot but when you’re in debt, you have to make sacrifices.  Don’t expect to live a rich lifestyle when you have no money.  Live poor and work extra jobs if you want to attack that debt.  If you follow this savings plan, you can potentially save $500 a year if you set aside 10%!