For those of you staring down the barrel of thousands of dollars in student loan debt, I came up with a few personal finance tips to help you cope.
Paying Down You Debt:
Pay off your student loans as quickly as you can. Use the Loan Calculator and you will see what a significant difference it makes when you pay more than the minimum.
Pay down your loan if you get large chunks of money. If you get a bonus, you should put the majority of the money toward your loans. I understand that people see bonuses and tax refunds as fun money, but if you use the money to pay down your student loans you will wind up with more money in the long-run.
Here’s how (this is for anyone who doesn’t fully understand how loans work)- Let’s say you pay 5% interest a month on a $60,000 dollar loan. If you get a bonus check for $5,000 and you put the whole amount toward your loans (making your loan amount $55,000) then you’re %5 interest will only be compounding on the $55,000 now. This results in you paying less money on your loans in the long run. Saving you money.
Pay off your highest-rate debts first. This should go without saying, but to become financially independent and start accumulating wealth you need to have a financial strategy. Pay off the highest-rate debts (usually credit cards fall into this category) and leave lower interest rates (like mortgages) until last.
Finding Additional Money To Put Toward Loans:
Start tracking your spending. In order to find extra money to put toward your debt, you probably will need to cut spending. To do this, you need to know where your money goes. You can use excel, pen and paper, or there are some great smart-phone apps for tracking. Where do you spend unnecessary money? Do you go to Starbucks everyday? If so, that $5 cup of coffee amounts to over $1,500 a year in spending.
If you’re a serial credit-card swiper, pay in cash. There is a reason that casinos don’t make people pay for games in cash; it’s because it is harder for people to spend cash. If you force yourself to pay for everything in cash, rather than with a credit card you will cut down in spending.
Also check out: Considering the Repercussions of Student Loans