After the recent recession, many people had to find ways to earn an income without a traditional 9-5 job. The result of that dark era in economic history was actually quite influential for freelancers everywhere.
Since then, freelancers in every industry have flourished. The number of freelancers in America now totaling over 53 million people, and that number is only rising. In fact, a recent trends report by Intuit estimates that by 2020, over 40% of the United States workforce will be made up of freelancers.
As someone who has been a self-employed freelancer for over 18 months now, I know firsthand how rewarding it is to be in charge of my own career destiny. However, I also know how difficult it is to stay motivated and ensure that all the bills get paid on a variable income.
One type of debt that is difficult to conquer as a freelancer and business owner is student loan debt. After all, one month of income could be the highest in your work history while the next month could be the lowest.
So, how can you pay off your student loans and make sure you have enough money to live on and pay your other bills? Here are a few tips:
1. Be Aware of Your Regular Monthly Expenses
If you have variable income, it’s important to be very aware of your expenses. It’s great if your monthly income is on average $6,000, but if you have to pay $3,000 just in business expenses every month, you have to budget accordingly.
People who have variable income also need to consider other responsibilities. These include large bills that come in only at certain times a year, like car insurance, tax payments, and healthcare premiums. Because you don’t know exactly how much money you will earn each month, these loan payments can make or break you.
Being closely aware of your regular spending, in addition to knowing your larger yearly expenses, is important. People who have variable income need to be more conscious of their spending since they never know if’ they’re going to have an income dip the following month.
2. Know Your Averages
Knowing your average monthly income is a great tool in helping you decide how high of a student loan payment you can make. It can be scary to send in $500 extra to your student loan servicer, especially if you don’t know what the next month will bring.
However, if you have a sense of your monthly averages and nothing has changed in your business, you can feel confident knowing that you can afford a certain payment. This will take time to figure out. If you are new to variable income, you should wait until you can average a few months of income.
If you’ve had variable income for years, you can average 12 months to get a sense of what to expect. This is my own trick for budgeting with my variable income. If I work hard, my monthly income will likely increase over time, allowing me to make higher and higher student loan payments until I get rid of my debt entirely.
3. Make Your Student Loan Bill A Top Priority
I have several freelancers whom I hire for my own business. These contractors include staff writers, technical help, and a virtual assistant who works up to ten hours every week helping me. I know I have to pay my team in order for my business to run effectively, so I always make sure I have a certain amount of money in my bank account to pay them every month.
I’m sure other freelancers have people they can’t live without, too, like a regular babysitter who helps them get work done without kids climbing all over them.
If you always make sure your bills are covered in these areas, then why should your student loan payment be any less important? After all, decreasing your student loan burden only increases your total net worth. Once your student loan is paid off, you’ll have more money each month to devote to improving your business or even your retirement account.
Because of these considerations, you should treat your student loan-payment as one of the most important bills you have, along the ranks of your rent and electric bill. If you are short on cash, you can get rid of your cable, co-working space, extra office supplies, and even some of your subcontractors before skipping a student loan bill.
By treating your student loan bill as a top priority and a “need” rather than just another monthly bill, you will be more focused on it. And you’ll be well on your way to being student loan debt free.
4. Have an Emergency Fund
I make it a point to keep an emergency fund at all times. This fund, above everything else, makes me sure that I always have a backup to pay my student loans.
An example that may help you is that if you’ve calculated that you can afford a $400/month student loan payment based on your expenses and averages, you should continue to pay that each month, always keeping it a top priority with your other vital monthly expenses like rent or your mortgage payment.
However, if you have a bad month in which a key client doesn’t pay or a large contract doesn’t come through, you might be concerned about making that $400 payment in addition to all your other financial responsibilities. This is where having an emergency fund will help you to keep your monthly budget on track. You can borrow from yourself, and as soon as you have a high income month again, you can refill your emergency fund.
Most financial experts recommend starting an emergency fund at $1,000-$2,000, which will cover most basic life emergencies. Then, once you have that in place, you can slowly grow it to cover six months of expenses. For people with variable income, a large emergency fund is even more important because they can’t always predict how much they will make from month to month.
My current emergency fund sits at $5,000, and while I’m always adding to it when I can, I feel comfortable knowing that it would cover most major issues.
Using these tips, you should not only become more aware of your monthly spending and business expenses, but you should also have a better handle on just how much you can afford in student loan payments. This estimate might allow you to pay well above the minimum to pay off your student loans faster, or it will let you know where you need to cut back so you can make your payments on time.
Over time, you will get more and more used to your variable income and how to predict its highs and lows. I know it’s been a big learning experience for me, but being a part of the freelancer economy and having more autonomy in my life has been more than worth it.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
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 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% 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 email@example.com, 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
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
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.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|