A 2018 report by the Federal Reserve Bank of New York found that about 44.7 million Americans have student loan debt, totaling over $1.47 trillion. If you’re in student loan debt, you’re not alone, and you can be proactive about reaching your financial goals. Budgeting is one of the best ways to avoid more debt and save for the future. Creating and sticking to a monthly budget is hard enough, even if you don’t have student loan payments to worry about.
However, there are ways to make juggling your student loan payments and sticking with a strict budget easier. Take these helpful tips into consideration so you can get on the right track financially and reach your goals.
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1. Set Up a Concrete Budget
Having a vague idea of where your money goes each month is not effective enough to help you save money for big financial goals and future plans. To really begin to see a change in your monthly financial wiggle room, you’ll need to carefully track your spending and plan for future costs, such as car maintenance or a trip out of town.
Write down what you spend your money on and the income you earn each month to find out where your money is allocated. Take a moment to consider your monthly expenses and which ones are truly necessary. If you can cut down on some expenses, such as your movie streaming service or gym membership, you can find simple ways to save money faster.
2. Get a Side Gig
To save, you must have more money coming in than is going out. Therefore, if you’ve cut down on your monthly expenses as much as you can, you’ll need to focus on increasing your income. Side gigs are a great way to potentially make more room in your budget, even with your student loan payments in play.
With technology so closely integrated into our lives, remote jobs are more prevalent and most are extremely flexible. You may be able to find a job as a virtual assistant or social media assistant that you can do remotely. You could also make money with a side hustle as a rideshare driver, babysitter, pet sitter, or by running errands for a business professional.
If you do pick up a side gig, you’ll need to be careful with what you do with this extra income. Put it away in a savings account or deposit it directly to repay your student loans. When you make more income, it’s important to use it for a cause that’ll help you financially and not use it as an excuse to spend frivolously.
3. Prepare for Emergencies
An unexpected car breakdown or medical emergency can set your budget over the edge, even if you don’t have student loans to pay. In addition to setting a monthly budget, it’s just as important to have an emergency fund set aside specifically for unpredictable expenses and situations. Setting aside money for emergencies can ensure you don’t miss a student loan payment and get yourself into more debt if a problem arises.
4. Track Your Loans
Knowing your student loan balance is important so you can ensure you’re making progress. Watching your student loan debt slowly disappear once you implement a strict budget is also encouraging and can be just the motivation you need to keep working hard at your budget.
If you’re in a position to aggressively repay your student loans, consider setting a repayment deadline for yourself. Calculate how much extra money you’ll need to pay over the minimum payment to meet this deadline. Try to stick with sending in that extra payment each month so you can satisfy your student loan debt repayment plan on the date you choose.
5. Automate Payments
Automated payments are taken directly out of your bank account. If you can set up your student loans for automatic payments, it’s one of the best ways to ensure you stick to your budget. Since the money is directly taken from your account to pay for your loans, you’re not tempted to spend it elsewhere or skip your loan payment altogether for other expenses.
6. Refinance if Necessary
In some cases, you may be eligible to refinance your loans for a lower interest rate. To do this, you should first contact several lenders so you can compare terms. When you find a lender that offers an enticing interest rate, you’ll need to sign a new contract with the lender. Your student loans will be consolidated and you’ll start a new loan with this lender for the remaining balance. If the interest rate on the new loan is lower, you’ll save money by refinancing on these new loan terms.
7. Apply for Deferment or Forbearance When Necessary
If you’re experiencing financial hardship, you may be tempted to simply skip a student loan payment. However, depending on your situation, it may be best to apply for a loan deferment or forbearance instead. A loan deferment or forbearance allows you to temporarily skip student loan payments without penalty. With a deferment, you don’t accrue interest during the time you’re eligible to skip your payments. However, if you only qualify for loan forbearance, you’re still responsible for interest during this time.
Your lender has specific requirements you must meet to qualify for deferment or forbearance. You may need to prove you’re suffering from financial hardship to qualify. Contact your lender to learn more about the application process and eligibility guidelines for deferment and forbearance.
Student loans can wreak havoc on your budget, especially if you have lofty financial goals. However, by sticking with a budget and following these financial strategies, you can stay on track and make progress toward a debt-free future.
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