Tip #1: Start with the Essentials

Your first move is to gain a clear picture of your current financial situation. Begin by creating a simple budget from scratch. Review several months of checking account and credit card statements and itemize expenses as essential or discretionary.

Your Essential Expenses will include:

• Rent or Mortgage
• Student Loan Payments
• Other Loan Payments (e.g., cars, credit cards)
• Utilities & Insurance
• Gas & Groceries
• Savings Contributions

Your Discretionary Expenses will include:

• Clothes
• Dining Out & Entertainment
• Vacations & Travel
• Streaming Services
• Miscellaneous Shopping

When creating your new budget, start with your essential expenses. Prioritizing your financial obligations first ensures you can stay current on the most important bills. Then, begin adding discretionary spending items when your budget allows.

Tip #2: Try a Budgeting Framework

If you find creating a budget from scratch to be too confusing or time-consuming, consider using a simple framework to streamline the process. The 50/30/20 Budget framework allows you to quickly organize your expenses into three basic categories:

• 50% – Needs:
  • This section encompasses your “essential expenses” from earlier: rent, minimum payments on current loans, utilities, insurance, gas, groceries, and savings contributions.

• 30% – Wants:
  • The wants category makes up “discretionary expenses” from earlier: clothing, dining out, entertainment, vacations, travel, streaming services, and other miscellaneous shopping.

• 20% – Savings & Debt:
  • Lastly, 20% of your budget will focus on boosting your savings and retirement accounts or paying extra toward your outstanding loan balances.

The 50/30/20 framework is effective because it’s easy to know exactly how much you can spend in each category. If you notice that, for example, your “Needs” require more than 50% of your budget, you can borrow from other categories (starting with your “Wants”).

NOTE: Do not limit your “Wants” too much. Often, people will cut out all the fun in their lives to pay off debt quicker. However, this move usually leaves people feeling unfulfilled, and they ultimately throw in the towel or go on spending sprees after weeks or months of being deprived of fun.

The most important feature of this budget is the balance it provides for your finances and life.

Tip #3: Consolidate Other Loans to Free Up Cash

You’ve probably already investigated refinancing your student loans, but this move isn’t always the best fit. Depending on the type of student loans you have (federal vs. private), you might face higher interest rates, eligibility requirements, or unfavorable terms.

Sometimes, the best way to manage your student loan payments is to reduce other debts that are eating into your budget, such as car loans, credit cards, personal loans, and payday loans.

• Refinance Your Auto Loan:
  • There are three primary ways to lower your monthly car payments through refinancing: 1) If your credit score has improved since you financed your car, 2) interest rates have decreased since you bought your car, or 3) you extend the term by 6-12 months.
  • Switching your current car loan to the credit union is one of the easiest and quickest ways to free up extra cash and reduce the total interest you pay over the life of your loan.
• Consolidate Credit Card Debt: 
  • Nothing will take your hard-earned dollars faster than high-interest credit cards. Scrap costly rewards credit cards and transfer your current balances to a new, lower-rate card at the credit union. You will instantly save money that can be applied to your student loans.
  • Why pay extra interest to a big bank or credit card company when those funds could help you eliminate other debts?
• Use a Debt Consolidation Loan:
  • If you’re juggling multiple unsecured loans, such as credit cards, personal loans, payday loans, and Buy Now, Pay Later loans, an ideal solution is to combine these high-interest balances into a lower-rate debt consolidation loan.
  • Debt consolidation loans provide three distinct advantages that can save you a significant amount of money:
    • The interest rates are typically lower than credit cards.
    • Set payments allow you to pay off the loan quicker vs. credit card minimum payments.
    • Paying off the loan faster provides even more savings that can be applied to your student loans.

Tip #4: Stay Motivated Along the Way

Paying off debt carries many of the same emotional challenges that people face when trying to lose weight. You want to be thinner tomorrow, not months or years from now. It’s the same when it comes to managing student loans. The process is more like a marathon than a sprint.

Staying motivated and remaining disciplined with your financial plan is possible if you:

• Be Patient
  • Losing weight doesn’t happen overnight. However, after several weeks of effort, you begin to see the numbers on the scale going down and your clothes fit better. This motivation keeps you going. It’s the same with any large debt. Stick with it, and soon you’ll notice your balance decreasing and your payoff date getting closer. Remember, every student loan payment is one step closer to your goal. Just keep moving forward one step at a time.
• Focus on Progress:
  • Too often, people focus on perfection, but the goal is to progress. If your new budget gets off track temporarily, take time to right the ship. Then, keep moving forward. Don’t let a financial setback derail or undo all the progress you’ve made. Just like when trying to lose weight, acknowledge what happened, create a plan to overcome it in the future, and keep going.
• Celebrate Small Wins:
  • One of the best ways to stay motivated is to look behind you and see how far you’ve come. Set small goals for yourself, such as making three on-time payments in a row or successfully managing your budget for two months. Then, reward yourself with a small (inexpensive) gift and start marching toward your next milestone.
• Schedule Regular Check-Ins:
  • Life is always changing. To ensure your budget aligns with your lifestyle, schedule monthly or bi-monthly check-ins. Your goal is to make sure your budget still works. If something is off or unrealistic, take the time to rework it and resume your efforts.

We’re Here to Help!

Gen Xers and Millennials are feeling the financial pinch with student loan payments resuming. Finding ways to manage these payments while raising their families, building their careers, and managing higher costs isn’t easy. However, with proper planning and exploring opportunities to consolidate high-interest loans, you may find the extra funds you need are closer than you think.

If you want to learn more about consolidating high-interest loans or have questions about student loans, we’re ready to help. Please stop by any of our convenient branch locations or call 717-263-4444 to speak with a team member today.