For many people, succeeding in life means buying a home, starting a family, seeing the world, and pursuing a slew of other dreams that are unique to the individual. However, many people delay these dreams because of their significant student loan debt.
The truth is you can do all of these things and more, even if you have student loan debt. You just have to be strategic about your choices and have a specific financial plan.
If You Want to Buy a Home
Tip #1: Start With the Down Payment
If you want to buy a home, one of the most important things to do is save for a down payment. There are many options when it comes to buying a home, some of which allow for less than a 20 percent down payment. However, you will usually be on the most solid financial footing if you do save 20 percent. This allows you to own ⅕ of your home right off the bat, avoid private mortgage insurance (PMI), and find better mortgage interest rates.
I know it’s difficult to save tens of thousands of dollars for a down payment, especially when you want to pay down student loans. However, saving for a down payment is the best way to buy a home and minimize financial risk.
Tip #2: Buy a Starter Home
Sure that four bedroom house on the lake would be absolutely amazing to own, but it’s important to take baby steps when pursuing homeownership. Buying a home is a serious decision — one of the biggest financial decisions you will probably make in your life.
Because of this, it’s important to buy a home you can realistically afford. For most people who are young and dealing with student loan debt, this usually means buying a “starter home.” A starter home is typically smaller, in need of some updating, and less expensive than your eventual dream home. Of course, the cost will vary depending on where you live.
The goal of a starter home is to get accustomed to home ownership and the highs and lows associated with it. According to a Wall Street Journal study, “the cost of keeping a typical home up to current standards for 30 years is almost four times the purchase price,” so it’s important to factor repair costs in when thinking about which home you can afford.
And remember, just because your mortgage payment would be lower than your rent doesn’t mean that homeownership will be more affordable overall — maintenance and taxes add up. Buying a home while you have student loan debt is fine, but you should have a comfortable financial buffer and a solid plan on how you will handle any financial emergencies that come up.
Tip #3: Get a Roommate
Living with a roommate is a great way to save on costs when you own a home. Whether you’re single or married, having a roommate definitely has its pros and cons. Financially speaking, though, it’s a big pro.
A roommate can help you pay a large chunk of your mortgage and utilities each month. Or you can put your roommate’s rent towards an extra student loan payment each month. Either way, having a roommate can definitely help you to manage your mortgage and your student loan payment concurrently.
If You Want to Travel the World
Tip #1: Use Credit Card Points
If you want to travel the world but have student loan debt holding you back, one way to help pay for your trip is to use credit card points with a technique called “credit card churning.” Essentially, you sign up for new credit cards, meet the minimum spending requirement, and earn sign up bonuses and points.
You can do some research to find the best cards for you, but I only recommend this route if you are credit card debt-free and have a lot of discipline when it comes to spending.
When done responsibly, strategically using rewards points a great way to travel on the cheap. I’ve done it many times myself to get free flights and free hotel rooms.
Tip #2: Work Remotely
In this technology age there are so many ways to work remotely, from starting your own online business to teaching classes online to freelancing.
When you work remotely, you don’t have to be tied down by rent or a mortgage. You can live in different places month to month, house sit, couch surf, and find many other ways to get housing on the cheap. At the same time, as long as you are working and making money, you can afford to live and pay your bills.
It takes some organization, but by working remotely (and regularly!) you can pay your bills on time and visit new places, too.
If You Want to Start a Family
Tip #1: Create an Emergency Fund
You can absolutely start a family even if you have student loan debt. I had my children even though we have six figures in student loan debt, but I planned it very carefully. The best thing I did and what I recommend to anyone who wants to be a parent is to create an emergency fund.
My husband and I saved $10,000 in a fund earmarked specifically for a baby. Then, we found out we were having twins, and we were so grateful we saved so much. Between medical costs, the delivery, and the initial baby costs (bottles, cribs, clothes, etc.) we completely wiped out our $10,000 savings fund just in the first few weeks our kids were around.
In sum, you absolutely need a strong emergency fund before having children. This gives you flexibility in case you have trouble making your payments or you have a medical emergency with your kids.
Tip #2: Buy Used
The common perception is that children are incredibly expensive — and they definitely can be. However, people often overspend. Kids don’t need brand new clothes or every toy on the market.
Buying used is often a good idea because growing babies hardly wear their clothes more than a few times each. I donated many outfits that my kids outgrew before they could even wear them.
When it came to safety items, like car seats and cribs, we bought them new. But just about everything else we bought was used and our kids are just fine. You can save a lot of money this way and use it for student loan payments.
You Can Have it All
The bottom line is you can have it all if you plan for it. I’ve been able to have kids and travel even though I have student loan debt. We make a concerted effort to lower our student loan burden every month, but we have two beautiful kids and we love taking them to see new places.
We cut back in many areas, like buying used and going without a TV for the past few years. We also live a fulfilling life, one where we make conscious money choices, stick to a budget, and pay our bills on time.
In order for you to have it all, too, be sure you’re not living well above your means. If you want to buy a home, focus on that goal. If you want to have kids, save that emergency fund. Be strategic about your money choices, stick to a budget, and have a plan. If you do that, you’ll be surprised at how much you can accomplish even with student loan debt to pay back.