Reorganizing Your Budget to Make Student Loan Debt a Priority – The top tips and tricks to rework your budget and make paying off your student loan debt a priority in your life.
Student loans have almost become the norm. So many people are attending colleges and getting these loans and not thinking anything of it. But in reality, they are just like any other debt and should be paid off as soon as possible.
For many college grads, student loan debt is a fact of life — something that they simply have to deal with for the next 10, 20 or ever 30 years.
Making these monthly payments can be a major strain on your budget, however, especially if you are trying to save up to meet a major life goal, such as getting married, starting a family, buying a house, or even just saving for retirement.
That is why it makes sense to prioritize paying off your student loan debt. The more quickly you pay off your debt, the less you will pay overall — and the more money you will have to devote to your other financial priorities. But if your funds are short, it can be difficult to figure out just how you can manage to pay down your loans while paying your other bills. Read on to learn how you can reorganize your budget to make your student loans your top priority.
But if your funds are short, it can be difficult to figure out just how you can manage to pay down your loans while paying your other bills. Read on to learn how you can reorganize your budget to make your student loans your top priority.
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Get Back to Basics
If you are serious about eliminating your student loan debt, you have to start from square one: budgeting. This means looking at how much money you have coming in each month — and where your money is going. Tracking some expenditures is fairly simple, such as rent and bills. Other purchases, such as picking up lunch or drinks after work, can be harder to calculate.
Try keeping receipts for everything you spend for a week — no matter how little the amount. You can also use an app that tracks your purchases and helps you manage your finances. You may be surprised at how much you are spending on things that you don’t really want or need.
Once you have these receipts and other financial documents, you can get a better picture of your financial situation. Then you can start the next step: cutting out waste so that you can tackle your debt.
Eliminate Unnecessary Expenses
Once you know where your money is going, you can start to trim the proverbial fat. There are likely items in your budget that you may consider to be necessities but are more of luxuries.
Take cable television, for example. In the age of Netflix and Hulu, is it really necessary to spend $100+ each month on cable?
Or your cell phone bill — is there a way to cut down the amount you spend on data or other coverage each month, perhaps by sharing a plan with a roommate or family member? Get creative, and find ways to slash costs so that you can put that money towards your student loans.
You can also cut expenses in more traditional ways.
- Stop going out to eat, and cook more meals at home.
- Consider moving back in with your parents, or if that idea doesn’t appeal to you, get a roommate.
- Sell your car and take public transportation, if possible, and
- Vow to avoid purchasing anything that you don’t need.
- Help yourself avoid impulse purchases by doing things like changing the settings on your phone, tablet or computer so that your credit card information is no longer stored; having to physically get your credit card to purchase something may remind you that you really shouldn’t be buying anything.
Each of these steps can help you save hundreds of dollars each month — which can add up to quite a lot of money to put towards student loans.
Put Extra Money Towards Your Loans Each Month
Now that you have extra money in your budget, don’t just sock it away in savings (that will come later, once you have paid off your loans). Add a little extra to your student loan payments each month; it could be as little as $50 or $100, or as much as a full extra payment.
However much you can spare, put it towards your student loans. By doing this, you will cut down on the amount of interest that you pay on your loans because you will pay off your loans much more quickly.
As you pay off your loans, be sure to utilize the avalanche strategy. This method is the best way to get out of debt. It involves paying off the loan with the highest interest rate first (typically these are private student loans), and then applying the amount that you would have paid to that loan to the loan with the next highest interest rate, and so on until you have paid off all of your loans.
Using the avalanche strategy is simple.
Just list your loans in order of interest rate, from highest to lowest. Then start paying extra on the loan with the highest interest rate (and only on the loan with the highest interest rate). As soon as that loan has been paid off, you can then use the money that you had been paying on that loan to pay off the next loan on the list. Using the avalanche strategy is incredibly effective — and can help you pay off your student loans quickly.
By making some sacrifices, getting creative, and putting in some work, you can reorganize your budget to pay off your student loans. While it may not be easy — particularly if your budget is already tight — doing so will help you reap the rewards of increased financial stability in the future.