As fun and rewarding as college was, once you graduate, reality bites. The truth of the matter is that most of us are going to be paying off student loans for quite a long time. Today’s college student graduates with an average of $30,000 in debt. That’s a staggering amount of money for anybody. But it’s especially high for a 20-something graduate.
In the first few years post-graduation, you want to try to spend as little as possible whenever you can. But then again, you want to be able to enjoy the finer things in life sometimes. Although you can’t just cut your budget to zero dollars spending money, you can streamline your life in smart ways.
Here are some budgeting hacks to make things a little easier for you.
- Stay in Balance
The key to finding a good system in handling your finances is being aware of your priorities and figuring out which ones need to be handled first.
Obviously, you need to be able to live with essentials. Short term things like rent, food, and transportation are all necessities that you’re going to put your income towards. Depending on how fast you want to pay off your student loans, you might have to cut some extracurricular activities you’re involved with.
With this in mind, you want a life that’s doing more than getting you by. And you want to be minimizing your debt to the best of your ability, but you’re still allowed to have fun.
That’s when the budget comes in. A common rule of thumb many financial experts rely on is the 50/30/20 budget plan. You want to spend fifty percent of your income on the previously mentioned essentials, 30 percent on entertainment, and the final 20 percent for savings and retirement. Write down how much of your monthly income is going to necessities and try to cut those things down as well. For instance, do you really need cable? Or can you cut that out of your life to save some money?
Then add categories for your savings such as emergency funds and setting up for retirement. You can maintain a solid money plan with a good budget app that helps you track your funds, reduce useless accounts, and cut wasteful spending.
- Avoid All Thrift and No Fun
Although your initial attempt might be to cut out as much spending as possible, sometimes the lowest prices aren’t the best option. There are essentials in life that can last you so long if you take care of them. Eating ramen noodles for dinner every night might be great financially, but neglecting your physical health will impact your life negatively in many other ways, and potentially for longer. It’s much better to take the time to learn to cook a few dishes, even if you happen to burn some ingredients along the way.
Cheapest isn’t always best. Investing in good, healthy food is a perfect example. But the same advice goes for cars, insurance, clothing, and more. Otherwise, you are spending a lot of money on repairs, emergencies, new duds and the like.
- Sign up for an income-driven repayment plan
When confronting your loan payments, know that you do have options. If you have federal loans that you have to pay off and you don’t have a steady income, you can always sign up for an income-driven repayment plan. It’s better to feel less stressed and pay off for longer than to feel tied down financially constantly.
This will cap your student loan payments from 10 to 15 percent of your discretionary income. If you need to make smaller payments, that’s fine. Most people do. With this plan, you can reduce your payments, and your remaining plan may be forgiven after 20 to 25 years depending on the plan you choose.
This option can be really useful for someone who isn’t making too much money out of college and is still trying to live life not miserably.
You’re allowed to eat more than ramen every day. In fact, you really should be eating more than ramen every day. So, consider some plans, manage your budget, set up your priorities, and see what’s right for you.
Just know that with each plan, comes a catch. The longer you wait to start paying off your student loans, the more you’ll have to pay. So, don’t be afraid to confront your finances. It’s just another payment. You can do it!