If you ever wondered how to save money with student debt, then you are in right place. Nowadays, it’s very unlikely to find a graduate without a mountain of student loan debt to pay. Millions of Americans are struggling with their student loans. With the combination of interest rates and repayment conditions, student loan turn out to be very expensive.
By the time you are eligible to settle your student loan, you will be paying around $2 on every $1 you borrowed. So, I’d suggest you start your financial planning today because there’s more to life than just paying off the debt. You also have the world to travel, a dream house to buy that comes with a sports car parked in the garage.
The dilemma is to decide how to save money for your early retirement when you have a student loan debt to deal with? So, here’s a bit of our input that might help you.
1. Baby Steps Towards Saving Money
Yes, I agree, when you are dealing with student loan debt, you might not have enough extra cash to save or to invest money. But you should not just give up. You’ve probably heard people say; something’s better than nothing. Well, they are right. Start saving a little but consistent amount at the end of each month. Even a small amount can make a big difference.
The process can be a little frustrating, perhaps try focusing on a short term goals first, like saving for an emergency fund, or a car. Once you’ve learned the discipline of consistently setting an amount aside each month, you will be ready to shift on your long-term goals of traveling the world and whatnot. And if you acquire some extra money in the form of a bonus, tax refunds, or some cash from your grandma, it will be the icing on the cake.
Also, make sure that your bank account is not a regular checking account, but a high-interest saving account. Or else you could be missing a considerable amount of interest on your saving.
2. Prioritize Your Money Saving Goals
Everyone has a different financial situation and different goals, so it makes sense that they employ a different strategy to tackle their debts. There are no established criteria for settling a loan. However, if you have multiple debts, it is wise to prioritize first. Try settling the loan with the highest interest rates first.
Also, try choosing the settlement plan with the maximum monthly payment you can afford. This will help you pay off your debt sooner. You will also end up saving a lot of money that could have been gone out as interest payments.
In addition, avoid taking another loan. You might be tempted to get another loan because the interest rates are too loan, but don’t. Stay satisfied with your limited resources.
3. Get Started With The Investment
Always remember the rule of thumb before entering into the investing business – Waiting might cost you money. Don’t waste your time and money thinking about what you can do with your savings. Invest as soon as possible; the sooner you invest, the more time your portfolio will have to generate profit.
If you are thinking of getting into the investment game once you settle your student debt, it will be a bad idea and a very costly decision. There’s a very high probability that you regret the delay.
4. Avoid interest capitalization.
If you fail to pay your interest, it gets added to your total loan balance- This is called ‘Interest Capitalization.’ Paying interests on time is the only way to keep your debt balance from growing. So, avoid interest capitalization in order to save money.
5. Avail Student Loan Discounts.
Most financial institutions offer loan discounts, where interest rates shrink by 0.50 percent. However, the lender must be allowed to have monthly loan payments to be automatically transferred to his bank account from the borrower’s bank.
If you follow these instructions and find some discipline in your life, you might be able to save a ton of money even after paying off your student debt.
I hope this helped. Thank you for reading.