You know the saying keep your friends close, but your enemies closer? Every person with student debt will totally know what I am talking about.
Student loan debt is one of the biggest concerns facing today’s graduates with over $1.5 trillion dollars owed in 2018. As the cost of education continues to rise, how can new graduates balance the weight of their bills?
It won’t be easy, but there are ways that you can stay on top of your student loan debt without letting it burden your day to day life. The secret is staying ahead of it. So often I see people avoid their debt responsibilities and as that happens interest continues to accrue, and they are more distressed than when they started.
I want to help you stay ahead and aware of your student debt each step of the way. Paying down your debt will be one of the biggest financial goals you will face in your life. I went through it, and now I want to help you too.
Ready to get started? Let’s dive on in.
Know The Facts
By physically typing (or writing) your debt information you will have a clear idea of how much you owe and will see concrete progress as you are paying it off.
One of the most encouraging things for me as I paid off my loans was seeing the balance decrease each month. Documenting each phase of the loan process will help keep you organized, motivated, and timely. Below are some items that you should fill in on your spreadsheet.
- How many loans do you have?
- It often takes more than one type of loan to get through college. The first column should list each loan provider, so you know who you owe the money to.
- How much do you owe on each loan?
- The next column should include the amount of money you owe to each provider. You can organize it any way you want, but I like starting with the most expensive and work my way down.
- Know your interest rate
- Not all loans are built alike. Each loan you have may have a different interest rates attached. Write those down so you know which ones they are. I recommend trying to pay off your highest interest rate loans first which you can do by contributing more money to those loans than the minimum required payment.
- Establish a monthly payment
- Each loan will have a recommended monthly payment. It is best to automate that payment each month, so you never miss a payment. You can also change your settings to contribute more or less depending on your situation.
- Write the due date
- This should merely be a formality since you have already automated your payments, but it is good to know when your payments are due. It will help you budget your costs and ensure that the loan is paid on time. Late fees and interest can really hurt your progress, so be sure to stay ahead of the due dates.
Make A New Budget
Now that you have your documentation taken care of, it’s time for a revamp of your budget. In financial planning, we talk about budgets a lot and we do that because when done to reflect your values and goals, it can really help you reach your goals more efficiently. The goal here is to manage and eliminate your student loan debt.
We have our goal, now it is time to put it in practice and factor in your student loan payments. You can open a new sheet in Excel for your new monthly budget. Start by adding up your current expenses: Housing
- Other debts: credit card, auto loan, personal loan, etc.
- Student loan payment
From the worksheet above, you will have calculated the amount of money that you will owe each month on your student loans. How does this payment affect your budget?
There may be places where you have to cut your expenses to include your student loan payment. If that is the case, the easiest way to cut costs is through the food and entertainment categories. Instead of stopping for a $4 coffee on the way to work, fill up a to-go mug from your house. Pack lunch instead of buying lunch, this trick can save you $10-15 per day! Take part in free events around your town from concerts to readings to festivals there are many free activities to help pad your budget.
A Financial Planner Can Help
Student loan debt is a long road, often taking years of discipline to pay off. The loan process is complex enough without adding the task of managing your financial wellbeing, that is where a financial planner can come in.
As a fiduciary, fee-only financial planner I focus on putting your best interest first – always. Together we can create the best plan for your financial success and achieving your goals.
Your student debt is not the only thing that defines your financial life. We would love to help you create a budget and a plan that helps you achieve all of your goals. Give us a call!