The topic we all dread – student loans. We loved them in college, but we hated them after graduation. Regardless, we’re stuck with them. Some student loans even follow you past your grave. Yikes. Let’s pay them off before that happens. However, not many people tell you how paying off debt is not only about money, it’s also about mindset. Have you ever heard of the avalanche and debt snowball method? And, no, I’m not talking about a snowstorm; I’m talking about two different methods to pay off student debt. Read on to find out which one you should be doing along with a few more tips to pay off student debt quicker.
1. Customize It To You
Paying off student debt is not one-size-fits-all. There are many strategies to do it and the best way will depend on knowing yourself. Let’s talk about the debt snowball method versus the debt avalanche method. In the debt avalanche method, you prioritize paying off the debt with the highest interest rate first. With the debt snowball method, you prioritize paying off the debt with the smallest amount first. Here’s a simple example; let’s say you have 2 loans: $2,000 (at 4% interest) and $8,000 (at 10% interest).
- Avalanche method: You’d pay off the $8,000 loan first because the interest will add up faster, so it makes more sense when totaled up.
- Snowball method: You’d pay off the $2,000 loan first because you’ll pay it much sooner and it could motivate you to keep going.
Are you still not sure which method is best for you? That’s okay. Here is an amazing resource a friend told me about when I was navigating my student debt journey. It’s called unbury.us and it’s a completely free and easy to use loan calculator. Just fill in your debts and it will automatically calculate and show you the difference between the two methods. Try out it and decide which works best for you personally.
2. Negotiate Starting Pay
Get in the habit of negotiating your pay when you start a job. Even if their offer is higher than you’ve ever had, try to get an extra $2/hour or $2,000 annually more. If they shoot you down, that’s okay. The point is to get in the habit to negotiate every single time because there is nothing to lose; you’ll just end up with the same pay if they say no. However, you may get lucky and get a pay bump at the start. Starting out with higher pay really adds up over the months and years which can leave you with more money to spend or pay off debt.
3. Get A Roommate
It may be tempting to get your own place, but if you’re buried in debt consider getting a roommate. Whether that means moving home to save for the first year or getting one (or two) roommates to split an apartment and (bonus) the bills. Independence can wait. Keep in mind it’s not forever. Set your limit and try it out for a year or two, it can save you thousands which could be going to student loans. Plus, it can be nice to have the support of others going through the same struggle.
4. Treat Yourself
Paying off debt isn’t only about how much you make, it’s also about mindset. Is there anything you want you can’t justify spending the money on? Well here’s an excuse to. Think of a checkpoint in your student loan debt where you’ll reward yourself. I’m not saying go out and buy a house, but you can reward yourself within your budget. Get that new laptop you’ve been eyeing or go on a $500 shopping spree. I promised myself I could get my brows micro bladed and you bet I paid it off quicker because I hate filling in my brows. Set your reward for paying off a fourth or a half of your student debt and it’ll get you motivated and progressing faster.
5. Gamify Saving
Saving can feel like a restriction and a reminder of all the fun things you don’t get to do. That’s why making a game out of it can make it easier. Try one of these money-saving challenges to make saving more interesting. For example, you can challenge a friend to see who can go longer without eating out for the month. Loser has to donate $1 to charity for each day of that month. It’s a win win even if you lose. Use the extra money saved from avoiding happy hour to pay off your debt quicker. See a list of money-saving challenges here.
6. Save a Safety Net
This may sound counter-intuitive, but you should NOT put all your savings into student loans and save some money for a safety net instead. Let me explain. If you fall on hard times like losing a job or your car breaks down, you’ll need extra money. However, if you don’t have the money, it may throw you off your monthly debt payments which means the interest will pile up as you struggle. That’s why it’s important to have a safety net to catch you when you fall financially.
You’ve probably wondered how much you should put in your savings account versus paying off student loans. Here’s a simple solution, split the extra money that you were going to use for student debt 50/50 into saving a safety net. Once you’ve saved 6 months’ worth of living expenses, you can go back to putting 100% of your extra funds into your student loans.
Student debt sucks, but remember that you’re not alone. There are many people struggling as well. It’s going to be a long and bumpy journey so take one day at a time. Make the best of your situation by applying a few lifestyle changes, educating yourself, and reach out for help when you need it. Most importantly, remember, each person’s journey is different. Whether you’re using the debt avalanche or debt snowball method, choose what’s best for you. For more money tips, click here.
DISCLAIMER
I’m not a certified financial planner/advisor nor a certified financial analyst nor an economist nor a CPA nor an accountant nor a lawyer. I’m not a finance professional through formal education. I’m just an average woman who couldn’t find relatable financial help while navigating my student debt journey. The contents on this site are for informational and entertainment purposes only and do not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my posts is appropriate for you or anyone else. By using this site, you agree to hold me harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site.
