5 Ways To Pay Down Debt and Increase Savings in the First Half of 2026

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The start of a new year is the perfect time to tighten your financial belt and get your money management under control. Whether your goal is to pay down debt, save for a big purchase or build your retirement fund, the first half of 2026 offers an opportune window to make progress.

With rising interest rates and inflation still impacting budgets, every dollar counts. Here are five practical strategies to reduce debt and grow your savings over the next six months, so you can stay on track and achieve your financial goals.

1. Sync Your Income With Your Expenses

No matter your goals for the first half of 2026, your best bet is to organize what’s coming in and what’s going out around the dates on your calendar. If you have a specific savings goal, divide that amount by the number of paychecks you have coming in the next six months. For example, if you want to save $2,000 and will receive 12 paychecks over the next 24 weeks, you would need to set aside about $167 per paycheck to reach that goal.

You should also make your income match your expenses, which means not only tracking your purchases but also comparing the dates on which you get paid to when your bills are due. For example, if you get paid on the 1st and the 15th of the month, match the bills you pay to either the first pay period or the second pay period.

2. Envision the Next 6 Months and Plan Accordingly

The beginning of the year is a great time to make a fresh start for fresh goals. It’s also the time to really examine your needs and wants, and prioritize spending money only on necessities to free up some wiggle room in your budget.

Setting goals — even lofty goals — is good, but six months isn’t that much time. Make sure to keep them realistic and limited. However, the first step to achieving your goals is setting them, so focus on making small financial changes to increase your chances of success.

3. Plan a (Modest) Sacrifice

Unless you’re able to bring in extra passive income, the only way to save more money is to spend less between now and summer. That requires sacrifice, but it doesn’t have to be anything too drastic. 

For example, try meal planning, make your coffee at home, or try a savings challenge like a no-spend month or the 26-week challenge. This is a biweekly challenge where you save increasing increments every two weeks. For example, you would save $4 in week one, $8 in week three and then up to $106 in week 26 — adding up to more than $1,400.

4. Spend Less To Save More

It’s easy to tell people to sock money away in savings instead of spending it on unnecessary stuff, but to carry it out in practice requires discipline. Here are a few tips to help you overcome impulse spending and retail therapy:

• Think about how many hours you will have to work to pay for the purchase. If your take-home pay is $1,000 a week after all deductions, and the item costs $100, you will be trading four hours of your life for that purchase ($1,000 net pay divided by 40 hours worked = $25 an hour. $100 divided by $25 = four hours of work).
• If you find that you buy many items impulsively in the supermarket, have your groceries delivered.
• Consider whether each purchase is a need or a want. Do you need more stuff? Do you want more clutter? Do you already have similar clothing in your closet?
• Remind yourself that an item on sale is not a bargain if you don’t need it, won’t use it or can’t afford it.

5. Budget in Reverse

Most advice for planning six months ahead starts with creating a budget, and that’s certainly good advice. However, making and sticking to a traditional budget simply isn’t for everyone — but who said it needs to be traditional?

Reverse budgeting is where you pay yourself first by putting money in savings or paying down debt and then moving on to your bills. Any income remaining can be spent on whatever you’d like, but remember it’s important to fund your goals first.

Andrew Lisa contributed to the reporting for this article.

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