Being single and trying to pay off your student loans is tough. While it may be easier to stick to a budget without sharing a bank account with someone else, having another income to help carry the debt burden can be very helpful.
If you don’t have a significant other or family member to help pay your student loans, here’s how to craft a repayment strategy around one income.
The issue with debt and one income
Your financial goals may not be extravagant, but having student loan debt while on a single income means you may not be able to afford the car or home you want. You might even be stuck with an extremely tight budget, one without much wriggle room for incidents or emergencies.
In other words, paying back student loan debt while on a single income can be harder than having debt with a dual income. You want to pay back debt quickly so you can move on to your other financial goals, and with the right planning in place, you can.
Be inspired by debt stories
As you start paying off your student loans, you may feel discouraged that your grand plans for financial freedom seem unattainable. But don’t let this doubt stop you — many other single individuals have been where you are and often felt the same way in the beginning.
Get motivated to start paying off debt by reading other personal debt and money stories. For example, Kara Perez paid off $25,000 of student loan debt without having a full-time job, and Monica Louie and her family paid off $120,000 of multiple types of debt on one income. It can be done, and these people have proven it!
There are countless stories of individuals who started with a variety of debt in different amounts and were able to come out on top. Use their stories to glean advice, wisdom, and tips as a way to propel you forward as you begin to pay down student loans.
Choose a debt payoff method
There are two main strategies for paying off your debts: the avalanche and the snowball method. Both of them have pros and cons, so let’s break down the basics of each so you can choose the best one for your situation.
Debt avalanche method
The debt avalanche method focuses on targeting debts with the highest interest first and paying them down as quickly as possible. You’ll start by listing out all of your debt accounts, including the balance due and interest rates, and then organize them based on the highest interest rate to the lowest interest rate.
The main advantages of this method are that you can save money in interest payments over the long term and essentially be able to pay off your student loans fasters. The downside is that you may be starting off with your largest debt balance first and thus won’t have a “quick win” of paying off a small loan first.
It can often feel like it takes longer to pay down debts using this method, even though the opposite is true.
Debt snowball method
The debt snowball method has the same basic function as the avalanche strategy but it approaches it in the opposite way. Instead of listing your debts with the highest interest rate first, you’ll list out your debts starting with the lowest amount owed.
The main advantage to this method is that since you start off with the lowest balance, you’re able to secure a quick win and feel like you’re actually making progress. This can give you the motivation you need to keep going and tackle larger accounts later.
As you pay off smaller balances, you’re able to allocate those funds towards your next debt and so on, thus creating a “snowball” effect. The downside to this is that you’ll pay more towards interest payments while you’re focusing on the balance owed, which means you’ll be in debt for a longer period of time.
Try alternative debt-reducing strategies
While you’re listing out all your debts and have your accounts in front of you, write down the phone number or website for each. Set aside time to call or email the customer service department for each account and see what your options are. Can you negotiate a lower interest rate?
Depending on your type of student loans, you may be able to refinance them with your current lender or a new lender with better rates or payment options. A quick phone call could help you reduce your monthly payments and give you some much-needed breathing room.
Learn to live a minimal lifestyle
In the past I wouldn’t have given much thought to how adopting a minimal lifestyle and living on less could have such a drastic affect on my ability pay off debt. But honestly, it’s been one of the most impactful changes I’ve implemented while trying to reach financial freedom.
As I paid off $14,000 on a single income, I sold 30 percent of my belongings and moved into an apartment that was 300 square feet smaller. This reduced my monthly rent and stress level, as I was able to afford to travel more and spend money on experiences, instead of collecting things.
In the beginning, it’s tough to embrace a minimalist lifestyle but a simple way to start is by going on a spending challenge. There are multiple types of spending challenges, from cash-only methods to spending diets and year-long shopping bans.
Start small and experiment with doing a spending challenge for just 14 days, then try it for an entire month. Keep increasing your spending challenges until your mindset about consuming and buying begins to change.
You’ll begin to see that you don’t “need” everything you thought you did, and you’ll find that living with less is very liberating. Learn more about how minimalism could help you pay down debt here.
Paying off debt on a single income may seem impossible, but it’s not. Start small in the beginning so you’re not overwhelmed or tempted to give up. Think of your debt payoff journey as a long-term plan, one that’s just the first step towards achieving future goals of financial freedom.
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