Realigning your money in 2026: How to pay off debt and build savings
Associated Press
Paying off debt
After losing her job as a magazine editor in September, Rachel Pelovitz, 33, had to take a closer look at her finances. Having acquired a significant amount of debt over the last few years due to her husband’s year-and-a-half-long unemployment, Pelovitz explored several options to pay it off. Ultimately, Pelovitz and her husband chose to sell their house and work with a debt consolidation organization.
“Rather than rely on getting more debt, we are currently selling our house,” Pelovitz said.
Pelovitz’s main goal for 2026 is to pay off half of her credit card debt. And, with some of the money from selling the house, start investing moderately.
If you’ve also experienced a layoff, you can read expert recommendations to help you take care of your finances and your mental health here.
Building a savings account
For Jenni Lee, 27, this is going to be the year when she gets strict about building her savings account. While Lee considers herself generally good with money, over the last six months she has overspent and wants to rein it in. The long-term goal for her savings journey is for Lee to buy a house.
“I’m now in my late 20s, I’m starting to really think about where I pinch now so it won’t hurt later when I finally decide to purchase and own a place,” said Lee, a tech worker and lifestyle TikTok creator based in Chicago.
As she saves for her future home and possibly a trip to South Korea, Lee wants to cut unnecessary spending on clothing items and eating out.
Social media microtrends are a common influence on people’s shopping decisions, and this can lead to overspending. If you’re looking to avoid spending money on microtrends, you can find experts’ recommendations here.
Building an emergency fund
If you are in a position to do so, having multiple financial goals you’re working towards at the same time can be a great way to speed up your progress. For Worcester resident Melanie Duarte, 23, her New Year’s money goals include paying off her student loans and credit card debt while building an emergency fund.
“I made sure to include it in my budget, even if it’s something as small as like $ 50. I just want to make sure I still put something in (my emergency fund) so that it eventually multiplies,” said Duarte, who owns a marketing agency.
Duarte’s family didn’t speak openly about finances when she was growing up. But, since she opened her own business, Duarte has been slowly working on rewriting her relationship with money.
If you’re looking to start an emergency fund or create better habits while you save, you can read some experts’ recommendations here.
Finding balance
Finding a balance between saving for your long-term goals while also making sure you enjoy your money is important, but it can also be challenging. After the death of her grandfather just a few years after retirement, Tiana Stewart, 26, felt that he didn’t get to enjoy the fruits of his labor. So, this past year, Stewart decided to enjoy her life and travel.
“I do understand saving for retirement is important, but I also want to enjoy my life and the money that I work for at this time, especially being in my 20s,” said Stewart, who lives in Maryland.
But now, as she reflects on her financial future, Stewart wants to focus on paying off debt, saving, and investing. Having a healthy balance between enjoying life and saving for the future is what she wants to work toward.
For some, participating in budgeting challenges such as the no-buy year can be a great way to set boundaries on your spending and set aside money towards your financial goals. Many people start such challenges at the beginning of the year and commit to keep going until the end, but others start with a no-buy month.
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The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.
—Adriana Morga, Associated Press
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