Most folks hate the word.
However, budgeting is a must if you want to be financially stable.
Still, even the definition is one most would think is beneath them or a bit depressing; “A little pouch or knapsack, which may have come from a Gaulish (Celtic language) source that’s related to the Irish bolg, or “bag.”
The word turned up in English in the fifteenth century, having traveled via the French bougette, a diminutive form of bouge, or “leather bag.”
Budgeting So You Can Pay Off Your Student Loans
Indeed it can be depressing to think about a “budget.”
However, if you discipline your spending, this can actually be fun.
Like anything, once the habit is formed and you taste a little success, you’ll see that it suits you.
Many personal financial experts believe in the 50/30/20 rule.
It goes as follows; 50% goes to your necessary expenses (rent, food, car, etc.), 30% goes to discretionary spending (cell phone, internet, going out, shopping, etc.) and 20% goes to the financial obligations (retirement, cash for emergencies, loan payments, etc.).
(Did you know? One of the biggest reasons borrowers fall behind on their monthly payments is because they cannot afford the high monthly payments their servicers are requiring them to pay. Learning how to budget your money is one of the many ways to ease the stress of making payments on time, and lowering your student loan payment is one the best ways to help with budgeting. Here are 9 ways to lower a student loan payment.Click here to learn more and get the free guide).
Can I Do It?
Of course, this is a very general framework, and everyone is different.
Some folks have massive debt totaling half their income, and others are debt free.
This plan should apply to most folks in between.
After all, these are guidelines, not rules.
So examine your circumstances and adjust accordingly.
Yet overall, for many people, this budget method will work.
And, if you weren’t budgeting at all before, this is a huge step forward.
When you plan for your future monthly spending, do you use a budget?
Do you plan at all, or just figure it out as you go?
If you don’t use a budget already, this method could be a great way for you to get started.
It also takes less time and effort than some traditional budgets, where you plan every expense down to a specific category.
But, it’s also more detailed than a budget where you just track how much you have in the bank and make sure to spend less.
There is a little wiggle room you can take advantage of.
Pay Yourself First
Growing the 20% first is the best way to start.
The Center for Retirement Research at Boston College found that individuals earning the average wage should be saving at least 15 %of their income for retirement alone before looking at things like emergency funds and other savings.
If you are going to use the 50/30/20 rule, consider shifting around the percentages a bit to focus more on savings, investments, and debt payoff.
You can even make it the 50% category, then split the remainder of your living expenses and fun spending into the other 50%.
The more you save and the faster you can get out of debt, the better.
Now Get to It!
Here are a few key ways to get started because, be honest, we procrastinate!
You know that word.
You live that word…so get going!
You need to know where you’re money is going.
Some folks can have a sticky note on their computer to track expenses, others must keep a list.
Either way, know exactly where your money is going.
You’d be shocked at just how much more attentive this will make you.
Adopt a two day rule while shopping.
If you see something, wait two days.
If you really need it (or want it, actually), it’ll still be there this weekend.
Come up with a few short and long term money goals, and write them down.
Maybe you want to put as much money possible away each month toward your student loans.
Maybe your goal is to go on a dream vacation, build a six-month emergency fund, or stop living paycheck to paycheck.
You’d be surprised at the peace of mind of having just an extra $1,000 cash in your dresser.
Analyze Your Spending, go back to your tracked expenses, and examine them.
What did you spend the most money on?
Are you happy with how much you spent?
Be honest with yourself.
Does your spending match your goals?
Is your spending derailing your goals?
Some folks I know have benefited from Debtors Anonymous.
If you’re not quite there, it’s OK.
My goals were not for a long time.
Just acknowledge where you’re overspending and move forward.
After realizing how much I spent eating out, I said goodbye to Panera, and hello to bagged lunches.
If you work in an office, make Sunday a Trader Joe’s day.
If you’re not a great cook, they have delicious, pre-made salads and sandwiches for a third of the cost of eating out.
(Bonus Tip! One of the biggest reasons borrowers fall behind on their monthly payments is because they cannot afford the high monthly payments their servicers are requiring them to pay. Learning how to budget your money is one of the many ways to ease the stress of making payments on time, and lowering your student loan payment is one the best ways to help with budgeting. Here are 9 ways to lower a student loan payment.Click here to learn more and get the free guide).
But all you really need is a way to plan what you want your money to do for you
Whether that’s an Excel spreadsheet, YNAB, Mint, or even pen and paper.
Use what’s comfortable for you.
First, enter how much money you have now.
Not what you anticipate having, but what you have now.
Next, list where your money goes: rent, car repairs, fun money, groceries, student loan payments, retirement savings, etc.
It can be as detailed or simple as you want.
Don’t forget an emergency fund!
The comment about the $1,000 in the dresser?
1) 100% true!
2) it’s more than that and it’s not in my dresser! I’m not telling you where it is!
Bean Counter shows an Excel budget that he used to pay off his $55,000 student loan: