A lot of people I come across are so concerned with paying off their student debt that they just throw money at it and hope it gets paid down. Is this the best way to plan though? Here’s my advice:
- Have a payment plan — having a plan is the best way to get anything done. With clear goals in mind, you will always know exactly how much each month is allocated to debt repayment. This makes it easier for you to plan for your discretionary payments each month, instead of just spending and using what’s left over to pay off debt. Treat your monthly debt repayments as a non-discretionary expense.
- Don’t put all of your money towards paying off your debt! — most of you are probably saying…what did she just say?? But ask yourself, paying off your debt is great if you are able to go to work and earn your income. What happens if you get injured and can’t work, or you become critically ill and you can’t work – your income stops and now you are left with a partially paid off debt and NO savings. Put together a plan where you allocate some of your funds to paying down your debt, some towards insurance, and some towards savings.
- Consolidate your debt — if you have different types of debt (student loans, line of credits, mortgages, credit card debt, etc.) try your best to consolidate them all into you one loan with the lowest interest rate. Credit card debt is likely your highest interest rate, so visit your bank or financial advisor and try to get a line of credit so you can completely pay off your credit card debt. This will make it easier for you to pay off all of your debt faster because you have freed up more cash by paying less in interest each month.