Advice from a financial strategist on paying off student debt
[Ed. note: This belongs to our series of posts featuring tips for recent grads from LinkedIn users. Jos Willard is a financial strategist (Canada Loyal Financial) who specializes in personal finance education for families and corporate employees, with a focus on debt repayment and retirement strategies. He’s also been a broke student with loans to repay and a family to support]
The toughest thing for a new grad when paying down debts is finding the money. Here are two steps to take that can help ensure the funds you seek are available.
1. Budget: It’s the oldest trick in the book, and we’re all tired of hearing it, but just as with many a “tired old standard,” we repeat it because it’s true. Go over your bank statements (keeping a spending diary is even better) and put together a budget based around 3 priorities:
- Necessities (Food, Shelter, Utilities)
- Debt Repayment/Savings
- Fun Money
If there’s anything left after that, you can spend it how you like. Make sure you have some money for fun stuff. Debt repayment is like losing weight. If you cut out all the things you enjoy, you’ll binge and blow your diet, and wind up worse off than before.
2. Pay in Cash: Pay for everything each day in cash. When you come home each night, drop what’s left in your pockets into a piggy bank. At the end of a set period of time (month, year, etc.) count what’s in the piggy, and use it for big expenses (holiday or birthday shopping), or for extra payments on the loan. To make this more effective, refuse to spend coins during the day. Some banks have an electronic version of this, which rounds up every debit card payment to the nearest dollar and puts the remainder into a savings account.
Do you have any financial tips on paying off student debt?