Over the past 2 decades, the annual cost of a college education is rising steadily and the level of student loan debt has accelerated to a jaw-dropping $1.35trillion in America, which is spread among 45 million people, as per recent statistics from the New York Federal Reserve. The study ranks student loans are the second-largest debt, the largest being mortgage debt. This shows that student loan debt is even higher than credit card debt and auto loan debt.
It is surprising to note that there are considerably large numbers of borrowers who go through a tough time in repaying their student loans and it is also noticed that 15% of debt is more than 90 days delinquent. If you want to reverse this worrying trend, you have to imply a clear financial strategy. Here are few budgeting tips to follow if you’re struggling with your student loan debt.
#1: Be angry about your debt
You have to be angry with the debt that you accumulated while studying. You shouldn’t feel comfortable with the debt that you accumulated in college as this will make you delay taking action against it. Once you reach the ultimate level of infuriation, you will be hell-bent to pay it down and become debt-free as soon as you can. If required, opt for second jobs or federal programs, or debt forgiveness programs through which you can chuck off a portion of the debt.
#2: The 20-30-50 method is a successful one
If you think that the budget is not a worthy option, the 20-30-50 plan can be one of the most flexible ways of accounting for your expenses. Initially, make sure you keep aside 20% of the take-home pay towards your financial future. Here you could use that money to direct it towards paying off the loans. Next, allot 30% towards wants/fun like eating out or going to parties with friends. Ultimately, spend 50% of your income on essential expenses like rent.
#3: You should save money for yourself
Irrespective of the debt that you’re carrying, if you don’t pay yourself, you’re committing a huge blunder. In case you earn a decent amount of money, make sure you stack aside 10% of your month towards your debt payments and another 10% towards savings. Keep track of it and whenever you get extra funds, increase the payments.
#4: Keep tracing everything that you spend
When you aren’t tracking your finances carefully, it’s easy for you to spend more money. You should ideally track all expenses, even those that you have paid in cash. The best way is to automate your savings and checking account so that a portion of your funds get deducted from your account. This way you can continue with saving even though you may forget.
Even after you follow the above-mentioned steps to follow a budget when you’re struggling with the student loan payments, you should still avoid taking on additional debt. Owing too much debt at a very young age can bar you from taking out new lines of credit soon.