How To Pay Down Debt and Increase Savings in the Second Half of 2021

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It might be hard to believe that you’re closer to next New Year’s Eve than last New Year’s Eve, but believe it or not, 2021 is officially over the hump. No matter what your financial goals were coming into the year, it’s time to regroup, recalculate and replan for the next six months. Maybe you want to save for a winter vacation, finally get out of debt or maybe just sock some money away to buy gifts for the holidays. Six months is enough time to do that — but it’s not all the time in the world. Get started now.

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Sync Your Income With Your Expenses

No matter your goals for the second half of 2021, your best bet is to organize what’s coming in and what’s going out around the dates on your calendar.

“Determine what your savings goal is for the remainder of the year and then divide that into the number of paychecks remaining,” said Justin Green, CFP and founder of Assist FP, a virtual financial planning firm that specializes in working with young professionals and self-employed millennials. “Set up automatic deposits from your paycheck into a savings account. By automating the process, you never see the funds in your checking account and are less likely to dip into it.”

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Laura Lonie, a CPA and financial coach, agrees with the concept but expands on the details.

“Make your income match your expenses,” Lonie said. “Compare 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 second pay period. Ask your creditors if you can move your payment dates to match your paychecks. If you can’t, pay bills earlier than the due date to keep your income and expenses in sync.”

Find Out: How To Calculate Your Debt-to-Income Ratio

Envision the Next 6 Months and Plan Accordingly

Treat mid-July as something like New Year’s Eve in summer — a fresh start for fresh goals.

“Focus on what you really want to happen in the next six months,” said Mary Elizabeth, personal finance expert and founder of MeMoreMoney. “Take a look at your needs and wants critically. I would start by prioritizing your necessities as well as those that will free up some cash flow. Next, focus on what you really want to happen in six months. What is that one thing? What is that goal? Usually, it’s money-related or achieving something for yourself like starting a project, getting out of debt, etc. Think about what you need specifically to achieve this goal and create a plan and budget accordingly.”

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Setting goals — even lofty goals — is good, but six months isn’t that much time. Make sure to keep those goals realistic and limited.

“It’s important not to have too many goals because if you do, then they might be mutually exclusive, so pick one and stick with it,” Elizabeth said.

Lonie agrees that it’s wise to keep goals limited in scope.

“Focus on making small financial changes to increase your chances of success,” Lonie said. “Instead of telling yourself you will never eat out again until you are debt-free, perhaps you can decide to eat out four times a month instead of eight times a month.”

Tips: 25 Ways To Save Yourself From Your Debt Disaster

Plan a (Modest) Sacrifice

If your goal is to save a few hundred extra dollars for Christmas presents or to start 2022 with a vacation, none of that is out of reach. But unless you’re able to earn extra income, the only way to save more money is to spend less between now and then. That requires sacrifice — but it doesn’t have to be anything too drastic.

“Pick a few activities to give up that you won’t miss,” Elizabeth said. “Give up your morning coffee, eat at home instead of out and avoid the mall. I’ll share an example to illustrate. For six months, let’s say you spend $3 per day for coffee — this is about what a fancy latte might cost. Six weeks come to $168 or thereabouts in savings in terms of giving up your morning beverage alone. Given that this is not including other things you could give up like eating dinner out, costing an average of around $20 every time, that would be equal to another $120.”

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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. Lonie offers the following tips to 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 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 do not need it, will not use it and cannot afford it.

Read: How Millennial Women Can Take Control of Their Debt

Budget in Reverse

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

“If budgeting scares you, then try ‘reverse budgeting,'” Green said. “This is where you pay yourself first — savings, debt paydown, etc. — and then your bills. Any income remaining can be spent on whatever you’d like. It’s important to fund your goals first, though.”

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Last updated: July 7, 2021

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About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for, a financial publication in the heart of Wall Street's investment community in New York City.
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