Congrats! You finished school and are ready to take on life! You have now entered the “real” world.
You are welcomed into this new life with bills and debt. Life loves to hand out those pesky student loans! I graduated with about $30K in student debt, and I am still working my way down. It has been around a year and I am almost halfway!
On the flip side, life also hands post-grads a job. This usually means you have some sort of income. I had a job in college, but it paid for groceries each month; nothing more. Now I have a real job that pays bills, debt, and fun things too.
It can be overwhelming to figure out what to do with your money. Do you invest, pay down your debt, or just live life to the fullest?
If you are like me and hate being in debt, then here are my different tips and tricks that have helped me make a pretty big dent as fast as possible.
I tend to follow Dave Ramsay’s advice and pay off my loans before thinking about other investments. I have gotten pretty lost in the research rabbit trails of interest rates.
In theory, if I were to invest my extra money into stocks I might actually be better off in the end than if I were to pay off my debt. However, that is a risk.
Paying off your loans is not risking anything.
You have to pay off your loans eventually. If the economy goes down and your stocks go to nil then that is money wasted that could have gone towards your debt.
Furthermore, when you get into a routine of paying your debt aggressively, you are building great habits! When I am done paying my loans down, I will already have the skills and discipline it takes to save as much extra money as possible for investing!
Make a Budget
This is very important. A budget can sound boring and “adult”, but it is not so scary. A budget is a powerful tool.
Every month you get X amount of dollars, and a budget is a tool that allows you to control where those X dollars actually go to.
Budgets help guide my actions throughout the month. Each month I budget $200 for restaurants. If it is the 28th of the month and I still have $100 left then I can definitely afford to go out with my co-workers. If, however, I have $50 left and it is only the 7th of the month, then maybe I should hold off for a bit.
Budgets also help in the grocery store. The grocery store is one place you will spend a surprising amount of money, but a budget helps keep everything in perspective. Maybe I won’t get that dessert, extra snacks, or the filet mignon. I should just stick to my list and get the cheaper options.
Finally, budgets help you keep track of what you spend money on, giving you a great tool to reflect back on and see how you can save extra money.
Learn to Say No
This is a difficult thing to do. But this is the only way you can follow your budget with any success.
This might come easier to others, but it is a big challenge for me. I have a hard time being content with the now. I constantly look for the next “big” thing I want to do. The next “big” thing I want to buy. After my first year of working, I got a sizable tax return followed by a sizable promotion. Instead of pouring it into my debt, I bought something I have dreamed about for 7 years: a motorcycle.
Do I regret it? NO. But it still goes to show that if I had paid my debt instead, I might be free a few months earlier than I will end up being. So the lesson here is learning when and how to say no. My only tip here is to remember that every dollar matters!
If you have ever backpacked, you know that every ounce counts! You might cut your toothbrush in half or do anything to save an ounce. It only takes 16 little alterations to save a pound!
The same is true for your money! One coffee here, an extra t-shirt there, and all of a sudden your spending hundreds over your budget! It goes a long way to say no to that extra lunch when you have food at home!
If you are concerned about missing the social atmosphere of eating out, then I have another great tip for you! Try eating a big snack before you go out. This will make sure you don’t splurge on the giant porterhouse and dessert. Instead, you might get a small salad and potentially save $30.
This is one of the biggest helpers in paying that debt fast. The trick is very simple. At the beginning of each month, I make my budget. I take into account any trips or plans I have, what I spent the previous month, and what I want to spend this month. I always leave a little wiggle room, about $200 in what I call the “sunk fund.” This is for those random expenditures you forget about.
Once I have my budget setup, I will have a section for student loans. It is at this point that I pay my monthly payment. I don’t wait until the end of the month. If I wait until the end, I will end up stealing some money from my student loan budget when I want to afford that extra dessert. However, if that money is already gone, then to eat out I might have to steal from my hobbies budget or somewhere else instead.
That’s it! Super easy. Make a budget and pay your loans right when you budget them. If you do that, you will begin making some massive dents in your debt. And make sure you give yourself little rewards! When I got under $20K I bought myself a nice dinner as a reward! Just keep grinding them down.
Previously published on Medium.com.
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