While now’s the time to make New Year’s resolutions about everything from your career path to overall lifestyle — you will get up earlier each day to go jogging — it’s also the time to make student loan resolutions.
Nicole Middendorf, CEO of Prosperwell Financial and wealth advisor with Raymond James, tells Pillar that your goal for 2020 should be to get out of debt. With some simple financial restructuring, you can start off the New Year finding ways to reduce your student loan debt — and with some easy, actionable steps, you can continue to do so throughout the year.
Here, Middendorf and other finance experts share student loan resolution ideas that are easier to achieve than you may think.
1. Make Sure You’re Budgeting All Your Expenses
Even if you currently budget your expenses, are you making sure to budget all of them?
“Most people do not live under a budget,” Middendorf says. “If you have a budget and have a goal and a timeline for that goal, you can achieve it. Prosperwell Financial has a budget worksheet on our website that people can use to help develop a budget.”
2. Cut Out Every Possible Extraneous Expense
When you make (or remake) your budget, you’ll be able to recognize all the expenses you didn’t even realize you’re making. Perhaps it’s that gym membership that you signed up for during a promotional period — but you only went for a month or two and always think you’ll go back. Or maybe it’s a streaming service that you barely watch anymore. Or maybe you don’t need to eat out every night.
“Cut out every expense you possibly can so that you are paying off your debt as fast as possible,” Middendorf says. “As an example, if you owe $2400, you can find $200 a month somewhere — for just one year — such as going out to eat, cable, or any ‘extra’ expenses that you can cut.”
“Get rid of expensive cable TV because you can get a package of channels instead on Apple TV or with specialty channels like HBO and Netflix,” he tells Pillar. “A company out of Canada, HayU, charges $5.99 a month for all the reality TV you can binge on. You can also look up the digital packages you need for your Apple TV, or say it was eight to ten channels you like out of the thousands they offer on cable, and lock your rate at $20 per month.”
3. Limit Lifestyle Inflation
Andrea Woroch, consumer savings expert, tells Pillar that it’s important to limit lifestyle inflation, too. She says that when you get your first job out of college or your first promotion, it may be tempting to buy more expensive things, like a bigger TV or car.
“When you make more money, it’s natural to feel the urge to spend more and you feel like you can afford to do that,” she says. “But it’s important to not to lose sight of your goals, especially now. This is the time to limit lifestyle inflation so you can put more of your hard earnings toward becoming debt-free faster.”
She suggests setting aside a little extra fun money, though, so you don’t get burned out. “But stick to your tight college budget for as long as you can — keep that roommate, live further from downtown, stick with a used car, and cook at home whenever possible,” Woroch says. “These will all help you save.”
4. Take On A Side Hustle And Increase Your Income
Until you start a side hustle, you may not realize how much of a financial impact it can make, particularly in regard to your student loans and increasing your monthly payments. “At first, it might not be fun to work extra, but the sooner you pay off your debt, the sooner you’ll have more flexibility in the lifestyle to do more of the things you enjoy,” Woroch says. “The good news is, you don’t have to work a second job and long hours at a restaurant or retail job during the week after your day job — which could totally burn you out. Instead, do something as simple as pet-sitting and earn up to $1000 a month via sites like Rover.com.” She says you can also double-down on your side earning hustle by freelancing from home while you’re watching someone’s pet.
5. Increase Your Student Loan Payment
Woroch suggests increasing your student loan payment — and you can do so by trimming money you spend on other things, such as entertainment or some of those extraneous expenses in #2. You can also do so by taking on a side hustle (see #4).
“Even if you can’t afford to double it, putting any extra toward your student loan payment each month will help you pay off that debt faster,” she says. “This also allows you to be flexible with how much extra you pay toward it without feeling like a failure when you can’t afford to pay the high amount you set for yourself.” And, every time you save, you can put your savings to work by using it to pay down your student loan debt, she says.
6. Focus On Your Loan With The Highest Interest Rate
Middendorf says that one way to approach paying back your student loans is to focus on one of them in particular. “Look at the loans you have and find the one with the highest interest rate,” she says. “Focus on that one and pay it off.”
Dr. Edmunds agrees. “Student loan issuers are making money off sky-high interest rates,” he says. He suggests figuring out a plan to pay off the student loan with high interest. “For example, let’s say you had $50,000 in student loans — you could owe 10% fixed compounded over 10 years, at which point the loan is more like $86,000 — more than $36,000 owed in that span of time.”
7. Refinance Your Loan(s)
Refinancing your loans is also worth looking into as you make your student loan resolutions. “Refinancing your loan is a great way to get a break on what you owe,” Dr. Edmunds says. “Check out offers from candidates running for office or any relief bill that might have passed, any initiatives you can find to help reduce the rate of interest, or any options that will forgive a portion of your loan.”
8. Pay Down Your Student Loans — But Also Live Your Best Life
Dr. Edmunds says that once the meter begins to run on your student loan(s) and your income continues to remain stagnant, it becomes emotionally draining to think about the burden — but this is also why it’s important to live your best life. “Focus on creating more business in an area in which you are skilled,” he says. “Bottom line, you should not be living in a basement and eating ramen to pay your loans.”