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5 Crucial Steps To Paying Off Your Student Loans Before Your 30s

5 Crucial Steps To Paying Off Your Student Loans Before Your 30s
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Student loan debt is a national problem. As of January 2016, total US student loan debt was over $1.2 trillion, and market analysts have warned about how this expanding student loan debt has become a bubble. That bubble bursting could have serious consequences for the US economy, as banks and the government could be crushed under a pile of insolvent student loans.

But the reality is that the student loan debt problem will not be fixed easily, whether at the societal or the individual level. But there are a few things which any student can do to ensure that he is debt free in his 30s. Here are five steps which can make the difference between a manageable debt and a crushing one.

1. Spend less

Let us start with one fact: by and large, people go to college because they want money. College should be viewed as an investment where you spend money on tuition now to make more money later – and despite the concerns over debt, college is still a good investment.

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But the first step to make money is to not spend it. You are in debt. And the reality is that when you are in debt, there are sacrifices which you have to make in order to get out of debt. It may mean delaying a marriage, getting a worse car, or not eating out, but things like that will help to lessen debt over time.

I won’t deny that this is one tough step. But there is no easy way to getting out of student debt.

2. Don’t look for the easy way out

There are thousands if not millions of young adults just searching for an easy way to wipe out their student loan debt and start clean. And that sort of environment attracts scammers looking to prey on the fears and hopes of the desperate.

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Honest student debt relief organizations will never demand money up front, but the simplest rule you can follow is that if a group’s offer seems too good to be true, then it probably is. This example from the Consumer Financial Protection Bureau should serve as an example of some of the things a scammer will do.

There is no easy way out of student debt, and looking for one will get you in trouble. Acknowledging that you are in trouble is the first step to getting out of it.

3. Get a government job

Everyone knows that the military is an option for many individuals to get into college for free. But you don’t have to face bullets in order to qualify for government loan forgiveness programs.

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Most government jobs, and especially teachers, can be qualified for a loan forgiveness program where a set amount is forgiven every year. This can be as much as $10,000 per year for government employees in forgiveness. If you are unwilling to commit to years of government service, then a short-term option is to take a stint in AmeriCorps or the Peace Corps.

It should be noted that these programs have a catch. Most loan forgiveness programs will require you to make 120 payments on time before the loans are forgiven. And some students will struggle when they realize that loan forgiveness programs do not apply to personal finance, such as car loans you may have taken out..

4. Pay off private loans first

The vast majority of student loans come from the government. A 2014 estimate showed that out of the $1.2 trillion in student debt, just $150 billion of those loans are private.

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But private loans are much more dangerous, and should thus seek first priority. The aforementioned loan forgiveness programs do not apply to private loans. And perhaps most importantly of all, private student loans generally have a higher interest rate compared to federal loans.

As a matter of fact, the higher interest rate thing should be noted in and of itself. It may seem obvious, but there are too many people who don’t prioritize paying off the loan with the highest interest rate. This does not just apply to student loan debt: while paying off student loan debt is important, don’t do it if you’ve got credit card debt that will strangle your credit faster.

5. Don’t consolidate your loans.

In order to make paying student loans easier, some people opt for loan consolidation. Loan consolidation combines all of your small loans into one big loan. The government can track your payments based off your income, and the result is an easier to pay off loan which you can just handle month after month.

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Except not really. Terms for long consolidation will generally assume that your time for repayment will last longer than if you had not consolidated your loans, which means that more interest will accrue and the loans becomes more expensive over the long term. If you want your loans paid off sooner, then track your loans yourself, and pay off as much as you can every month.

Featured photo credit: Francisco Osario via flickr.com

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Last Updated on July 20, 2021

Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

Financial Freedom is Not a Fantasy: 9 Secrets to Get You There
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Have you ever considered your life now, and how it would be if you had more time to spend with your family and less worries about money?

Nowadays, financial stress is one of the most troublesome weights in life. If you’ve ever encountered financial stress, you know the difficulty of not having enough income to pay your obligations or bills.

Many people say that money is not the ultimate goal of life. While that’s true, money certainly plays a very significant role. The meaning of financial freedom changes with the different phases of our life, but ultimately, it is something that many people strive for.

In this article, we’ll explain how to capture that financial freedom you’ve been looking for. Read on to learn the secrets to financial freedom.

Break Free of Your Finances

Financial freedom is about having a constant flow of cash from your assets to cover all your regular needs.

When you are not worried about your income, or living paycheck to paycheck, you gain a great sense of freedom. It’s the freedom to be obtain and do what you truly need to make your way through everyday life.

Gaining financial freedom, though, is a process of growth, making small improvements and gaining emotional strength.

Though it seems hard to believe, it is really very simple to get financial freedom.

To do so, you simply need to make sure that your assets exceed your liabilities. In other words, you’ll need to find the sweet-spot where your residuals meet or surpass your expenses. This is something that you can achieve with the proper plan.

While not every person will accomplish financial freedom, the potential for anyone to do so is certainly there. Anyone can achieve this success, regardless of their income level.

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Outlined below are 9 secrets that will help you in your goals of achieving financial freedom.

1. Stop Unnecessary Spending

We often spend money inwardly, instead of objectively.

For example, you may spend when you’re anxious, depressed, restless, exhausted, from fear of missing out, or to please others. This is a very unhealthy way to handle your finances.

To stop this habitual spending, log down all your spending over the course of a month.

Just as some people keep a food diary, keep an expense diary. Remember not to just write down how much and what you spent the money on, also include the circumstances of why you spent the money. Was it an impulse buy at the checkout line or was it something you planned to purchase?

This increased self-awareness could enable you to avoid triggering situations in the future when you are considering an impulse buy.

2. Plan a Monthly Budget

This is a great opportunity to get serious.

Take a seat with your spouse or partner and make a monthly budget based on your income, not your expenses. You are never again going to spend more cash then you have on hand.

Overspending is the thing that led you to more financial obligations. Make sure you decide every month what is coming in and what will be going out and stick to that budget… no matter what.

3. Cut-up Credit Cards

Perhaps you are the type of person who always pays your credit card balance in full before the end of your billing cycle, and enjoys the reward points you gain. If this is the case, then you’re already way ahead of the game.

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If not, you may want to consider ridding your life of the burden that credit cards bring.

Many cards have strategies set up so that if you make a certain number of late payments, they will raise your interest rate much higher. This can really add up in the long run and you won’t be doing your financial situation any favors. If you’re prone to late payments or have a large balance due on your cards, cut them up!

Without proper self control on credit card spending and payments, you are basically throwing your money away. To ensure that you have better control over your spending, use only cash or debit for all future purchases (and don’t forget to pay at least your minimum payment on your cut-up cards each month!).

4. Increase Savings

There is no doubt that for a comfortable retirement you must accumulate satisfactory savings throughout your working life.

It’s good practice to save up to 15% of your income.

Start with your workplace 401(k), if you have one. If not, a Roth IRA (if you are eligible) or a traditional IRA (if you are not eligible for the Roth) are the next logical steps.

Increase in longevity means you might be able to look forward to 25 to 30 years in retirement, or possibly even significantly more. Investing now in good retirement plans will ensure that you have a guaranteed a stable monthly income when the time comes to stop working. [1]

5. Invest Wisely

Consider investing in funds.

Specifically, you will gain higher returns if you invest in different types of mutual funds such as Debt funds, Equity funds and Hybrid funds with a proper balance, although it absolutely relies on your personal preferences and sense of risk taking.

To get the most of these benefits, make sure you are investing in a variety of assets. Another resource of investing in mutual funds is SIP (Systematic Investment Plan) where you invest some money every month in funds. SIP works by averaging the per unit price of the stock.

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Mutual fund investors are aware of the benefits of an SIP (Systematic Investment Plan). For one, it is the most secure way to invest in equity mutual plans so that wealth is created over a long period of time. This plan also helps you to gain a better sense of financial discipline, which will come in handy in all your financial endeavors.

6. Invest in Gold

There isn’t really a better way to invest in gold than to have the physical gold itself in your possession.

You can purchase gold coins and bars from mints as well as from coin dealers and other private sellers.

Another way to invest in gold is through ETFs (Exchange Traded Funds).

These are is similar to mutual funds but they are exclusively investments of gold. ETFs are great because they offer more liquidity; the ETF owns the actual physical gold, stores it, and retains the value of the shares. These shares can then be bought and sold in the stock market, and one big benefit is that the transaction costs of gold ETFs are much lower than the that of physical gold.

With its consistently-increasing demand, investment in gold can be very wise long-term investment to make.

7. Stash Emergency Funds

Whether it’s a cash gift or a work bonus, always try to save any extra money that comes your way rather than making unneeded purchases.

If you get paid every other week, you’ll get an “extra” paycheck (three rather than the usual two) twice a year. Either save those paychecks towards your emergency funds or utilize the money to pay down other obligations, such as loans, credit cards or other debts.

Make it hard to get your cash.

Put your savings in an alternate bank, maybe an online bank that forces you to delay for several business days before transferred money hits your regular bank account.

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8. Find Fabulous Mentors

Find a mentor, such as a friend or family member, who has exceptional control over their finances and pay attention to everything they do.

If you do not have any friends or family that are enjoying financial freedom, then find a mentor online! There are numerous blogs and guru websites featuring the advice of many people who have reached financial freedom, and they exist primarily to let you in on how to achieve it for yourself.

There are also plentiful forums available that share tips and tricks on how to best achieve financial freedom. Read as much as you can and start changing your habits for the better.

9. Be Extra Patient

Patience is the key of financial success.

Being patient can be quite tough, especially when you’re struggling with your finances, but having faith is worth it. You’ll continuously be on the right track if you are taking the proper steps above.

So don’t be discouraged, even if you are only saving a few dollars a month; it all adds up. Within just a few years you’ll look back proudly at your accomplishments and be glad that you had the patience to get there.

Financial Freedom for All

Anyone can achieve financial freedom, regardless of their financial circumstance.

Use the tips provided above to get yourself on the track to financial freedom and toss your monetary concerns out the window. If you wish to achieve a life with financial freedom for yourself and your family then you must adopt a disciplined approach towards your finances.

Following the simple secrets above is a great start to making your money work for you, so you can work less and live more!

Featured photo credit: rawpixel via unsplash.com

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Reference

[1] Hartford Gold Group: IRA Retirement Accounts

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