Growing up, your father probably told you something along the lines of, “Having kids isn’t cheap.”
Yes, the cost of raising children was high back then, but it’s even higher now. One thing many of our fathers probably didn’t face was the cost of kids plus tens of thousands of dollars in student loan debt accrued after college.
If you’re trying to juggle the family budget as well as paying off debt, it can be stressful. However, there are things you can do to help build up your family’s finances, despite your student debt. Here are a few tricks you can utilize.
1. Refinance high-interest student loans
One of the best ways to lower the cost of your student loans is to lower your interest rate through refinancing. The lower your interest rate, the more money you can put directly towards paying off your balance.
However, you can also refinance for a lower monthly payment and increase your cash flow. That can free up more money for family expenses or make your debt payments more manageable.
If you want to lower your interest rates, start by shopping around for student loan refinancing options. Many student loan refinancing lenders start with a soft check on your credit, which means you can collect a few offers without damaging your credit score.
These offers will come with various options, including fixed and variable interest rates, and a variety of repayment terms.
Just remember, the longer the term, the lower your monthly payment. Whereas the shorter your term, the quicker you can become debt-free. Which you pick is up to you – the “right answer” is really the option that best meets your needs.
I was able to refinance one of my student loans, and even though it was somewhat late in the game, it still helped me reach my goal of paying them off.
2. Make cutbacks where feasible
Making budget cutbacks always sounds awful. But what if there were cutbacks for things you’re paying for that, upon closer inspection, you realized you could just as easily live without?
For example, what if you and your family have two cars but would feasibly be able to live with just one? You could save thousands by becoming a one-car family.
In fact, one Student Loan Hero writer discovered she could save a minimum of $2,500 per year not having her car. Plus, that $2,500 didn’t even include how much she earned from selling her car, which was an additional $4,200. Not a bad way to add an immediate boost to your family budget.
If you comb through your bank and credit card statements, you might find spending patterns you could potentially break.
For example, maybe you thought you were spending only an average of $20 per week on coffee when it’s closer to $40 per week. Or you thought you don’t buy clothes that often, but your credit card or bank statement shows an annual clothing spending amount in the four- or five-digit figures.
Another big drain on finances? Food. The Bureau of Labor Statistics found that in 2015 people were spending an average of $4,015 per year on groceries and $3,008 on eating out. Yet, according to The United States Department of Agriculture (USDA), the cost of grocery-bought food is lower overall than the cost of restaurant dining. So even though you may be spending more money on groceries than take-out, you’re definitely getting more bang for your buck.
Those areas of spending that we aren’t always aware of are often some of the best places to find room to cut back.
3. Create multiple savings accounts for multiple goals
Once you free up funds by lowering interest rates and cutting back on expenditures, it’s important to set a goal for the money you have left over. But it doesn’t need to all go to your student loans.
Much of the success in paying off student loans comes from being able to stay motivated even when the process seems like it’s taking forever. Saving for other goals at the same time can help you do that.
Open separate savings accounts and pay each one at the beginning of the month just like you would a bill. That way you can be sure your vacation, down payment, or DIY treehouse fund only grows up, not down.
Plus, once you hit your goal amounts for these funds, you can move the amount you were saving each month for that fund to another fund. You can also divert it back to your student loans if that’s a higher priority.
4. Capitalize on tax benefits
Fun fact about student loans: You can receive a tax refund for the interest you’re paying on them. But that’s not the only way you can use tax benefits to strengthen your finances.
Other ways include maxing out your 401(k) retirement fund match if your employer offers it, since that’s pre-tax salary pay going toward your savings. And if your employer doesn’t offer it – or they do but you want to save even more for retirement – you could open an IRA.
With an IRA, you have the choice to go with Traditional or Roth. You’ll be able to add to your tax deductions now if you go with Traditional – or you can save on taxes in retirement if you go with Roth.
Finally, you can save tax-free for your kids’ college funds by taking advantage of a 529 plan. A 529 plan is a savings plan that enables you to put money away for your child’s education tax-free.
529 plans can be sponsored by the state or educational institutions or state agencies. Don’t forget, being able to save money tax-free and add to your tax deductible checklist frees up more money for other potential family expenses.
Taking the reins of student loans and your money
As of this year, there are 44.2 million Americans in student loan debt. If you ever feel alone in your struggle to balance your family finances with student loans, remember that number.
It’s never been cheap to raise a family, but many of today’s fathers now have to deal with student loan debt on top of everything else.
As difficult as it may seem, you can take control of your loans and meet your family’s financial needs at the same time – it just takes diligence and a bit of creativity. And, most importantly, it requires that you work hard to develop healthy money habits.