Today’s average college graduate leaves school with about $35,000 in student loan debt. That’s a hefty financial burden, especially in those first few years right out of school.
You may want to aggressively repay your loans, but you’d rather not celebrate your birthday with a cup of Ramen noodles. (A cup of Ramen noodles plus a cupcake, at least, would be nice.)
How do you strike the right balance between paying down debt and still living life to the fullest?
Try these five tips to maintain your sanity while repaying your student loans.
1. Stay in Balance
The key to handling your finances is to learn to balance the seemingly endless priorities competing for your limited income.
In the short-term, you need to make sure you’re fed, clothed, and relatively happy. You may not be able to live the high life, but at minimum, you want a life that’s satisfying and even a little fun (see tip #3).
Developing a monthly budget helps. First, write down how much you spend on necessities like rent, groceries, and utilities. See how you can reduce those categories as much as possible (like taking on a roommate or giving up your cable subscription.)
Next, add categories for long-term financial goals such as building your emergency savings, setting money aside for retirement, and repaying student loans. You may not be able to contribute a ton to these categories right now, but every little bit helps.
Finally, any money that’s remaining can go towards discretionary items, such as restaurants, entertainment, and decorating.
It’s admirable to want to aggressively repay your student loans. Just don’t do it at the expense of your other big goals. Creating a budget and then playing with the numbers is a great way to make sure your money is working as hard as possible.
2. Don’t Skimp on Important Items
There’s thriftiness, and then there’s stinginess.
Sometimes the lowest price isn’t the best decision. For example, eating ramen noodles might be great for your budget, but neglecting your health is a choice that could come back to haunt you — both physically and financially. Fresh fruits and veggies may help you save on doctors’ bills down the road. You’ll also have energy to shine at your job and earn that promotion.
Cheapest isn’t always best. Skimping on insurance, medical care, and car repairs will hurt your budget (and you) in the long run. Be frugal, but be wise about it.
3. Avoid All Thrift and No Fun
Smart money management is a lot like smart food management. While it’s generally best to make healthy choices, allowing yourself an occasional “treat” can keep you motivated.
When you feel like you’re depriving yourself, you’re more likely to become frustrated, which can lead to a big splurge. Build room in your budget for mini-splurges.
Yes, you may want to keep the dining out to a minimum so you can throw more money at your student loans, but it’s okay to allow yourself the occasional coffee or brunch out with friends. This can actually help you stick to your budget in the long run.
4. Imagine the Future
While you’re still young and untethered — no mortgage, no family to support — you can get away with living on a shoestring budget. Later in life, however, cost-cutting may not be quite as simple.
The more you chip away at your student loan balances now, the more money you’ll have later to pay for big-ticket items like a wedding or a down payment on a home.
Keep this motivation in mind when you’re making financial choices. Sure, that swanky apartment looks great now, but downgrading to a smaller place could help you save a few hundred dollars each month. That could help you repay your student loans a few years early and move on to pursuing other goals that much faster.
If you start to feel frustrated by living frugally while you pay down your loans, keep the big picture in mind. Every dollar you can towards your student loans now gives you more freedom in the future.
5. Defend Your Non-Negotiables
This said, don’t live so far in the future that you neglect the present moment. Choose a few favorite activities that you’ll include in your budget, regardless of your student loan balance.
Maybe, for example, you love to ski or snowboard. Several of your friends organize an annual mountain trip, which is one of your favorite memories. Don’t sacrifice this on the altar of student-loan-payoff. Enjoy those trips, even if it means you can only pay the minimum on your student loans for a month or two.
Yes, that’s right: it’s okay to maintain a slower loan payback schedule if you’re conscious about where else you’re spending your money.
Why? Because 20 years from now, you’re not going to look back on your life and remember that you repaid your student loans by age 27 vs. 29. But you’ll definitely remember the annual ski trip with your best friends. These are the moments that can’t be replicated. Grab them while they’re here.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.57% – 6.98%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 5.87%1||Undergrad & Graduate||Visit Earnest|
|2.80% – 6.22%2||Undergrad & Graduate||Visit Laurel Road|
|2.51% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.57% – 8.17%6||Undergrad & Graduate||Visit Citizens|