So now you’re out of school, six months have gone by, and your student loan payments begin.
You’ve been enjoying that extra cash and even took a couple of long weekends but now, the pinch comes.
You have that student loan payment and in some cases, they can be as high as five hundred dollars a month!
Now, if you’re fortunate enough to land a job with an employer that pays for (or part of) your student loans, your challenge is half solved.
Still, putting money away is a good idea and simpler than most folks want to admit.
Making consistent student loan payments on a budget just takes a little discipline.
(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. But there are several ways to lower your student loan payment to make it more affordable. Here are 9 ways to lower a student loan payment.Click here to learn more and get the free guide.)
Student Loan Payments on a Budget: Making A Plan
Back in the day, saving, or putting away for retirement, was a little bit of a chore.
Now, everything is automatic; you can have your student loan, car payment, retirement plan, and home loan, among other things deducted out of your paycheck.
You get used to it and it becomes less of a pinch.
Also, put away cash in a closet or something.
Seriously, that just comes in handy!
You can have a percentage of your paycheck go to a savings account, even at another bank, automatically.
Set the number to 10% at first.
That may seem like a lot, but understand the United States is among the worst of 23 industrialized countries at saving.
Here’s a short list:
- France: 15.4%
- Australia: 11.1%
- Germany: 9.9%
- Spain: 9.1%
- UK: 5.8%
- Ireland: 5.0%
- Canada: 5.0%
- US: 4.5%
- Japan: 0.8%
We’re not dead last, but we’re not great.
We used to be 19th out of 23 and, for the first time since the 70s, we beat Japan.
I think they may be suffering from the consumer demon.
Here’s the thing; if you have a $100, you can put away $10!
That’s two of those dopey lattes!
Required reading by anyone remotely serious about giving themselves a raise is David Bach’s book, “the Latte Factor”.
He decries the Starbucks phenomena.
Five dollars for a grande mocha, frappe whatsis with a shot of macadamia espresso?
First off, it’s coffee with milk.
You can make this at home, and if you’re in a hurry, 7-11 has coffee for $1.50 and you can add milk!
You have mocha coffee and it’s not 400 degrees.
I have done the black coffee taste test with people and 7-11 always wins, true story.
Creating Habits
Here’s how not minding some habits can kill your finances; one latte at $5/day x 7 days = $35 a week.
Now, with 52 weeks a year, that’s a total of $1,820.
That’s a down payment on car, a security deposit, or a year’s worth of student loan payments for some people.
Two years and you have almost four grand put away!
Don’t get me started on how much smoking costs.
We all have various habits that can kick our butt financially.
What are yours?
Is eating out every night a good idea?
You can probably cook more at home and it’d probably be better for you, frankly.
If you have a fridge in the office, hit up Trader Joe’s or a super market.
They have ready-made salads, sandwiches and soups.
Five days worth is nearly half of eating lunch out every day.
What’s $25 or $30 bucks a week in a year?
We just did the math on lattes, multiply that by four.
I also, recommend not putting a ton into a 401k or mutual fund.
Robert Kiyosaki, author of “Rich Dad, Poor Dad” and “Cashflow Quadrant,” suggests that no more than 10% of your net worth should be in stocks, which is what mutual funds or 401ks are mostly comprised of and not pixie dust.
If you recall the financial meltdown of 2008, it was fueled by mortgage backed securities, poured in to mutual funds and retirement plans.
If you do invest in company stock, keep it modest; 5-10% of your paycheck and don’t make your entire 401k the company stock, spread it out or diversify.
Enron wasn’t that long ago, remember?
(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. But there are several ways to lower your student loan payment to make it more affordable. Here are 9 ways to lower a student loan payment.Click here to learn more and get the free guide.)
Impulse Buying
Beware of impulse buying, too.
One day I was at my buddy’s house and we were watching a game.
His sound system was amazing.
I knew I had to have one.
Couple days later, I was at a Costco and saw the same system.
The price wasn’t too bad at $300.
However, I didn’t buy it right there.
I pulled up eBay on my phone, entered the make and model number and found the exact same system for $110 with free shipping.
I paid for the two year warranty which was $15.
Total cost; $125 and I only had to wait four days.
Is $175 extra something you could use?
I do this all the time.
I learned another trick from my girlfriend in college.
We were out shopping one day (I really should get a medal) and she was trying on boots.
We must have gone to five stores and she tried on four or five pairs of boots at each store.
Driving home, empty handed, I asked her why she didn’t buy this pair or that pair?
I never forgot what she said, “If one pair jumps out at me in a couple days, I’ll go back. They’ll still be there.”
She never went back.
Mind you, she bought clothes and shoes all the time as she was a girl in college.
But she had a discipline that breaks most of us who do not.
Impulse buying was why malls were invented and it can be fun but it can be devastating, financially.
Paying Bills
I mentioned ways to allocate portions of your paycheck so you don’t have to think about paying your bills or yourself.
With half of U.S. wage earners making less than $30,000 a year, this is harder for some than others.
Alas, bills must be paid.
Folks get embarrassed about picking up a second job.
Who cares? If
you make $40,000 a year and pick up an Uber route, bringing in $15,000 extra, on three nights work, why not?
Get a real estate license and sell houses on the weekend.
3% commission of a $300,000 sale of a home is $9,000 extra and you weren’t digging ditches to do it.
Three houses a year is $27,000.
There are a ton of things we can do.
Having two incomes is just smart.
What if you lose your job?
If you have some cash squirreled away and you have a second job or business, you’re not freaking out.
I have seen that too many times, in and out of my business.
A little discipline goes a long way where money is concerned.
(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. But there are several ways to lower your student loan payment to make it more affordable. Here are 9 ways to lower a student loan payment.Click here to learn more and get the free guide.)
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