3 EFFECTIVE Strategies to Pay Off Student Loan Debt: Practical Guide on Budget Management (+ INFOGRAPHIC)

a year ago

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student-loan-debt-budget-management-strategies

Student loan debt is the MOST burning topic in academic world. With over $1.48 trillion in loan debt, US students are constantly looking for ways to pay the borrowed money off. The Typical Student team has already told you How to Apply for Student Loan Forgiveness Before Trump Cancels It For Good? and provided a Student Loan Forgiveness Checklist.

 

If you want to get rid of your student loan debt ASAP, here’s the MOST practical guide on budget management. Is there anything better than the success stories of those who DID repay their debt? Tune in to learn more!

 

Strategy #1: Spreadsheet to Pay Student Loan Debt

via GIPHY

Can a spreadsheet help in paying your student loan debt? Absolutely! If you use it to plan your budget. This is the real example of Andrew Josuweit, who happens to be in charge of Student Loan Hero project. Andrew worked out a “spreadsheet strategy” allowing him to pay off $107,000 of student loan debt in several years! And he shared it with his —Āompanions in misfortune:

  1. List all your expenses and think critically about where you could make cuts.
  2. Figure out the percentage of your income left after your monthly expenses.
  3. Allocate 80% of the "spare change" to make additional student loan payments. These extra student loan payments dubbed "Debt Killer" helped Andrew pay off his loan debt faster.

Here are the tips to help you cut expenses in a few areas:

  • Use car sharing and don’t own a car. Result: no car insurance, car payments, and gas.
  • Split rent and other shared expenses with a roommate or partner, if applicable.
  • Check if there’s a possibility to expense your cell phone bill and internet for work.

Below you can see the "magic" spreadsheet:

 

student-loan-repayment-spreadsheet

Source: Andrew Josuweit

 

Strategy #2: Budget Management with 50/30/20 Rule

 

Most likely, you know about the 50/30/20 rule (or 50/20/30 rule). This is a budget management method that helps you split the expenses into 3 main categories: needs, wants, and obligations. Let’s break this down:

 

  • Under the 50/30/20 rule, 50% of your budget goes to “needs,” or crucial expenses paid to survive. These are: mortgage and rent, groceries, transportation, minimum loan and credit card payments.
  • 30% of your budget goes to discretionary expenses like cable subscription and cell phone bill. This category also includes expenses on entertainment, eating out, and traveling.
  • 20% of your budget goes to financial obligations like retirement contributions and emergency fund savings. This category would also include the extra loan payments to make the "Debt Killer" strategy possible.  

In total, you get 100% of expenses foreseen in your student budget.

debt-broke-no-money-us-student

Strategy #3: Mobile Apps for Budgeting

If you aren’t THAT old school, mobile applications can serve as great budgeting aides. Carrying the list of your expenses around might not be the best idea, unless it’s stored in your mobile. The most popular mobile apps for budgeting are:

 

  • Mint (iOS, Android) is not only free to sign up and use, but is also cross-platform. The app supports multiple financial institutions and has automatic transaction downloads and categorization. Mint is highly intuitive and easy to use, so you will get the complete layout of your expenses and the money left afterwards.
  • YNAB (iOS, Android) has a free 34-day trial, with an annual subscription for $83.99. The app is cross-platform and available on the web, Android, iPhone and iPad. YNAB prioritizes your every dollar, and developers claim the app saves its users up to $600 in the first month of use!
  • Personal Capital (iOS, Android) is a free app offering its users advanced financial tools and analytics to show where they stand with their budget. The app has multiple features from cash flow control to income reports.

Check the infographic below:

 

 

strategies-to-manage-student-budget-effectively-infographic-2018

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Any questions or propositions?