Student loans & life! It is an inevitable marriage and a challenging balancing act. There are no ideal student loan solutions. Student loans are without a doubt a large hindrance when it comes to managing your finances and getting rid of debt. When balancing student loans & life, your ability to save money for big purchases, like a car or house, can become difficult.
Student Loans & Life Balancing Act
Unlike your younger years, balancing financial goals is probably on a whole other level as an adult. Making sacrifices to your lifestyle and free time is most likely your strategy if you are in the process of saving for a larger purchase while also being tied up with mountains of student loan debt. Let’s focus on financial goals that include large purchases and student loan debt. Here are some tips to help you reach your goal.
Create a Budget
A budget is key to start balancing student loans & life. Your budget needs to include everything from day-to-day expenses, bill payments, and enough money to pay off student loan debt. When money is tight, a plan is the best way to keep your focus and avoid spending blindly on things you don’t need. This plan is called a budget when it comes to finances. A budget helps you track your income and identify non-essential categories to help stop you from accumulating too much consumer debt.
Pick the Right Loan Repayment Plan
Your standard plan for repaying federal student loans spreads payments over a 10-year period. However, is it the best option for you? The extended repayment plan spreads loan payments over 25 years. Therefore, monthly payments would decrease and allow you to save more money for a large purchase. Also, a graduated repayment plan lets you start with a smaller monthly payment and step up the dollar amount every two years. Another option to consider are plans that base your monthly student loan payments on your income. So what is your best choice? Keep in mind that extending the repayment of your loans adds interest and continues to drag out the debt.
Cut Unnecessary Costs
Sometimes, it is necessary to let go of things you love to earn money for things that are more important! This is an effective way to generate savings if you have a major purchase in mind. You can look at cutting back on entertainment, with cable as a start. Some other saving options come from cutting down on your eating out budget or cell phone plan.
Boost Your Income
Sometimes having a single job does not really cut it when balancing student loans and life. Taking a second job, part-time or even full-time will add to your savings quicker than virtually any other alternative. If you are not up to taking a second job, another option is to turn your hobby into an additional income source.
If you’re coping with settling credit card debt, it is important that you focus on paying that off before any other debt. Interest rates of credit cards are far higher than those for student loans.
You may also need to take a step make when setting financial goals around large purchases. It might make more sense to eliminate all your student loan debt first and then start saving. However, you don’t necessarily need to stop everything while getting rid of student loans. Building up your savings, an emergency fund and retirement are worthwhile goals to have.
Keeping these in your budget will make student loan repayment take longer, but it can be extremely beneficial. For example, you can take advantage of compound interest if you are investing in your retirement from an early age. If you have an emergency, you can avoid credit card debt by having some money set aside for such occasions.
If you are looking for ways to student debt relief speak with a certified credit counselor at ACCC today by calling 800-769-3571.