Parts 1 and 2 of this series talked about budgeting ideas that are applicable to everyone. Figure out where the money went and decide where it should go. But having large amounts of student loan debt throws a wrench in the works. Read on to see some quick, simple tips for budgeting when you have student loans.
First things first, you need to actually have a budget. If you have categorized all your spending for the last 30 days and sorted them into “Fixed” versus “Flexible” expenses (and savings and retirement) then you are ready to think about this problem. If you haven’t, you need to go back to reading Part 1 and Part 2.
Second, your loan minimum payments are necessarily fixed expenses. You have to make the minimum payments in other words. That’s why they’re minimums! But, this can mean a lot of things. You might have a very low (or maybe even zero) minimum payment if you’re on an Income Based Repayment plan. Or, maybe you haven’t even entered repayment yet. What do you do about loans in your budget then?
You need to account for them anyway, even if your minimum payment is zero. Why? Interest. Your loans are accusing interest daily, whether you are paying them or not. The most interest you accrue, the more you will end up paying in total. The smartest financial move for most borrowers is going to be working loans into your budget as a fixed expense even if you have a low or non-existent minimum payment.
Now that we’ve set up a budget and we agree that putting more money on your loans is the right course of action for most borrowers, what’s so special about budgeting with loans. There’s actually only one difference, and it can be put into 1 question:
What Fixed or Flexible Payments Can You Reduce or Eliminate To Shift Money to Loans?
Figure out what flexible expenses you can adjust to get your loan payments above minimum amounts. Do you eat out once a week? Could you cut it to every other week? Do you use the work vending machine too much (guilty)? Buy your snacks in bulk on Amazon instead. Do you eat out for lunch 3 times a week? Bring your own lunch instead. It’s way cheaper per meal to do it that way. What about those subscriptions you signed up for that you’re not exactly getting your money’s worth from? Subscription boxes like Ipsy or Birchbox? Just go to Sephora or Ulta and ask for samples of things you actually want to try. Spotify/Netflix/Hulu/Sling TV? Are you listening to music or watching movies/tv shows regularly or are you just keeping it around in case you need it?
These are the same types of questions anyone trying to save money from their expenses would need to ask. The only difference for a student loan borrower is that you’re shifting that money to your loan balance on top of your minimum payments so that you save money on interest in the long term.
Believe it or not, just shifting even a few dollars extra onto your loans will help you cut down how much you pay. Next post, I will be giving you the single most important tool that every single student loan borrower needs to use in order for you to see what I mean about shifting extra money to loans making a big difference in the long run.