Hi! My heart goes out to you– this is such a tough time for young people to make it financially. My kids are young adults and I completely sympathize with you on how hard it is to make a go of things financially especially when you are struggling with student loan debt. I admire your desire to save while paying down the debt – that is an admirable and do-able goal!
Let’s talk about some of the things you can do to meet your loan payments AND save money each month. First, it might be worth taking a snapshot of your total financial picture – making a “financial plan.” Financial planning entails the concept of complete financial health including:
· Managing cash flow
· Managing debt
· Planning for home purchases, kids’ college and other long term goals
· Insurance/ Risk Management
· Minimizing taxes legally
· Retirement planning
· Investing to grow your wealth
· Estate planning (including wills and trusts)
I am not sure what kind of debt you have in addition to your student loan, but you want to be sure to make the minimum payments on your credit card regularly and on time. Even better is to pay off your credit cards in full every month. .
Here are some steps I recommend to plan your finances so that you can save while paying student loans:
1. Make a budget if you don’t have one. I am not sure if you already have a budget, but the first thing today is create a simple budget so you can see what money comes in and what goes out. Here are three free sources for budget worksheets from Navy Federal Credit Union, America Saves, and the Federal Trade Commission.
2. Make sure you have an “emergency fund” – 3 of 6 months of money in a liquid (savings or checking account).
3. To save and meet all your payments, you may have to change your lifestyle somewhat to cut spending so that you have more to save. You could also maybe freelance or take second jobs to increase your income if that is something that interest you..
4. If you have access to one, start contributing to your company 401(k) plan when you can, especially if your company matches any of your contribution. That’s like getting extra salary! In fact, if your company does match contributions, you’d want to put enough money in the 401(k) to max out that match when you get to the point that you are able to. Your retirement contributions count as “saving” so once you are doing that you are meeting part of your goal.
5. When you get to the point that you have an emergency fund and are contributing to your 401(k), you can start investing the extra money you aren’t spending. You can use a do-it-yourself approach (such as an ETrade or Scottrade account) or hire an investment advisor to help.
6. Evaluate your insurance needs – life, auto, health, renters etc. to make sure the assets you have gained are safe.
7. Make sure you have a will and that your insurance beneficiaries are up to date.
These steps are just a start. If you are interested in finances and money management there is lots of good information out there to help you do it yourself. If you want to pay a professional for advice, consider hiring a CFP® (look for them on the CFP Board website) or http://www.cfp.net/utility/find-a-cfp-professional?utm_source=find-cfp&utm_medium=header&utm_content=homepage&utm_campaign=header to help you create and follow a comprehensive financial plan.
Good luck to you! It is hard to think about the burden of paying off your student loans, but just asking the question and beginning to think about making changes in your financial life is a good first step. I know you will get there in good order! Thank you for writing.
WalletHub Answers is a free service that helps consumers access financial information. Information on WalletHub Answers is provided “as is” and should not be considered financial, legal or investment advice. WalletHub is not a financial advisor, law firm, “lawyer referral service,” or a substitute for a financial advisor, attorney, or law firm. You may want to hire a professional before making any decision. WalletHub does not endorse any particular contributors and cannot guarantee the quality or reliability of any information posted. The helpfulness of a financial advisor's answer is not indicative of future advisor performance.