Introduction
Money management is an important part of life and a skill that should be learned early. It is especially important for young adults who are just beginning to take control of their finances. With the cost of college tuition rising, many students are graduating with student loan debt. It can be intimidating to pay off this debt while still trying to build a financial foundation in the future. But it is possible to manage student loan debt while still saving money. In this article, we will discuss the important money management tips for young adults with student loan debt.
Budgeting
Creating a budget is a critical component of money management and should be done before trying to tackle student loan debt. A budget does not have to be overly complicated but should include all of your income and expenses. This can help you keep track of where your money is coming from and where it is going. It also allows you to prioritize bills and determine where you have extra money to put towards student loan debt.
Creating a budget can be done in a spreadsheet format or through the use of money management apps such as Mint or You Need a Budget. Both of these options provide easily customizable budgets with budgeting features to help you track your finances.
Make a Plan for Repayment
Once you have created a budget, you should make a plan for repayment of your student loan debt. This plan should take into account your income and expenses to determine the best way to pay off your debt. You can do this by groups, individual lenders, or most popular, snowball or avalanche repayment.
Group repayment simply means you are putting money towards all of your loans at the same time. You are then allocating that money in an amount that will pay off the loans. The individual lender repayment plan is when you pay off each loan individually, starting with the one with the highest interest rate. Finally, you can choose to follow either the snowball method or avalanche method for your repayment.
The snowball method involves paying off the loan with the smallest balance first, while the avalanche method is paying off the loan with the highest interest rate first. Both of these methods have their benefits and can be used effectively to pay off student loan debt quickly.
Techniques to Help You Get Ahead
It can be difficult to pay off large amounts of student loan debt, but it is not impossible. To help make it easier, there are a few strategies and techniques you can use to help you get ahead with your repayment.
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Make biweekly payments: Making biweekly payments instead of the standard monthly payment can help you reduce the total amount of interest you have to pay. By making biweekly payments, you are essentially making 13 full payments over the course of the year, which is more than the usual 12 payments.
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Refinance student loans: Refinancing your student loans can help you reduce your student loan debt by lowering your interest rate. This can also save you money in the long run by reducing the amount of interest you owe.
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Pay extra on your loans: Paying extra on your student loan can significantly reduce the total amount of money you owe. By putting extra money towards your loans each month, you can reduce the total amount of debt you owe and get out of debt faster.
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Take advantage of deferment or forbearance options: Many lenders offer deferment or forbearance options for borrowers with financial difficulties. Deferment or forbearance can temporarily pause or reduce your loan payments to help you get back on track with your finances.
Emergency Fund
Saving money can be difficult when you are trying to pay off student loan debt, but it is necessary to have an emergency fund for unexpected expenses. An emergency fund is a set amount of money that you have saved in a separate account in case of a financial emergency. It can help you if you encounter an unexpected expense or have a job loss and need money for rent or bills.
Start by saving a small amount each month, such as 10-20% of your income. You can build your emergency fund by setting up automatic transfers into a separate savings account at the beginning of each month. This will help you accumulate a small amount of savings each month and can add up quickly over time.
Final Thoughts
Managing student loan debt while still saving money can be difficult, but it is not impossible. By creating a budget and making a plan for repayment, you can effectively manage your student loan debt without sacrificing your ability to save money. Additionally, taking advantage of options such as refinancing, extra payments, deferment or forbearance, and emergency savings can be extremely beneficial and help you get out of debt faster.
By following these money management tips for young adults with student loan debt, you can be well on your way to gaining financial freedom and building a secure financial future.