If you recently completed your studies and started a full-time job, you will enter the repayment phase of your student loans. While many student loan payments have been interrupted during the Covid-19 pandemic, it’s a good idea to make sure you’re ready for when student loan payments are interrupted.
Hopefully, you were able to minimize your use of student loans for living expenses while in college. Now it’s time to look at how you can manage your living expenses as you start paying back your student loans.
The good news is that there are plenty of options for fitting your student loan payments into your running budget. Most importantly, make sure you are proactive and reasonable about how you handle your basic living expenses during your student loan repayment.
Including student loan repayments in your budget
The first thing you want to do when you start paying back your student loans is include them in your monthly budget. If you don’t have a budget yet, make it a goal to create a budget and stick to it. Although the word budget often has a negative connotation to many people, a budget is really just a tool to help you save money on things that are not important to you, so that you can still have money for the things that are important.
There are many different ways to prepare a budget, but the simplest budget is just an addition of your income and expenses (usually on a monthly basis). Make sure your student loan repayment amount is included in your budget and adjust if necessary. It’s important to note that in addition to editing your spreadsheet, you also need to figure out the reason WHY you want a budget. Without your emotional commitment, it will be very difficult, if not impossible, to stay within your budget in the long run.
Reduce your loan payment
If you have a student loan balance that is higher than your annual salary, there are a few more options that you may be able to take advantage of. There are legal ways to lower your student loan payment amount, and many of them are available to many borrowers.
Federal student loan borrowers have income-based repayment strategies, such as extended repayment, stepped repayment, and income-based plans. And if you are going for student loan forgiveness, you must have an income-driven repayment plan.
Private student loan borrowers don’t have as many options, but refinancing your student loans can help lower your monthly payments.
Find ways to save on big expenses
If you’ve been working on your budget for a few months and find it a little tighter than you’d like, it might be time to take a closer look. You may have considered a few things to be “must haves” when you first created a budget that you could now reduce.
Making a budget isn’t meant to be a one-time “set it and forget it” — instead, it’s something that should change as you go through life.
In addition to cutting things out of your budget, we’ve got a list of 15 ways you can save more money each month. This includes things like eliminating bank charges, judicious use of credit card rewards, getting organized, and other tricks you may be able to use to stay within your budget.
Be sure to check that list to see if there’s anything that can help you.
Increase your income
In addition to reducing your expenses, you can also focus on increasing your income.
Of course, one of the best ways to increase your total income is to maximize your earnings from your full-time job, but it’s not the only way to increase your income.
You may consider investing in yourself by becoming an entrepreneur. You can also take advantage of a variety of sideline activities to generate additional income. The great thing about increasing your income when you already have a budget is that you know exactly what that extra income can best be spent on.
What NOT to do during the student loan repayment?
If you follow the advice above, you can better handle your normal living expenses while also paying your student loan. The one thing you should definitely NOT do is ignore your student loans or the impact they can have on your monthly budget. Burying your head in the sand is likely to lead to an undesirable financial situation.
Many graduates complete their college degrees and find themselves in a position where the student debt they owe feels overwhelming. If that describes your situation, don’t despair and don’t ignore the problem.
Instead, talk to your friends, family and trusted advisors and make a plan. This could be looking for ways to increase your income, reduce your expenses, adjust or refinance your existing debt, or all of the above.
Adding a student loan repayment to your monthly budget can make things a bit tight, especially if your monthly budget was already tight. But the same budgeting concepts that prepared you for financial success still apply.
Chart and track your income and expenses, remembering that a budget is a marathon, not a sprint. Involve your friends and family in your debt-paying journey, and you’ll be there in no time.
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