Its FINANCIAL FREEDOM FRIDAY again & today I want to discuss the elephant on my credit report …
student loan debt. Like many of you, I’m often overwhelmed by the amount of I have; in particular in comparison to my income. At this post in life, I’ve accepted the horrifying fact that I will likely be paying Aunt Sallie back for the remainder of it. Over the past year I’ve been hyper focused on reducing student loan debt and I’ve taken some pretty bold steps to get there.
3 Tips to Tackle Student Loan Debt.
disclaimer: I am NOT a Financial Adviser.
I’m simply sharing what I’ve learned in my quest to get my life & finances out of distress.
The first step I took to tackle my student loan debt is decrease my retirement savings account contribution, then I increased my payments to my student loan servicers and finally I focused on the loan with the smallest balance first. Now, now I know these are very scary and extremely bold moves to take but hear me out. I am a single-childless woman. My household is one. My primary financial goal is to reduce the amount of student loan debt I’ve been carrying. So I approached my finances much like I approach life, with the mind set that great risk yields even greater reward, so I took a leap of faith, a really really huge leap of faith.
Why would I decrease the contribution to my retirement savings account?
The point of having a retirement savings account is to ensure a comfortable lifestyle post-retirement. What other way can you improve your life than to becoming debt free sooner? When it comes to saving for retirement, time is of the essence. But please do not take time for granted. I would not suggest completely eliminating the contribution to your retirement savings plan, I would simply suggest to decrease it. For the past 5 years my employer has matched the first 5% of any contribution I make, so I had been working and contributing 10% of my income and being matched 15. Most financial experts suggest you save up to 10% of your income for retirement. With that in mind, I made the decision to decrease the contributions to my 401(k) in hopes to free up some cash so I can increase my contributions to my student loan payments.
Why increase monthly payments?
I this step is self explanatory. The more paid now the less that needs to be paid later, in fact increasing your payments by just $50 a month means your paying an additional $600 toward your balance. Considered it a “retirement bonus” if you pay off the account early that is just one less account and less interest you have to focus on. I literally have nothing else to share here except stressing the importance of making timely payments. Its silly to put yourself back over a few days of hanging on to your money. Also when repayment of your loans is concerned, the timelines of your payments have a impact on your overall credit worthiness. (more on this topic in a later post)
Why pay off the loan with the lowest amount first?
I have chosen to focus on my lowest balance loan first for 3 reasons.
1) All my loans are pretty much the same interest rate.
2) I feel like focusing on paying off my loan with the lowest balance first will make managing my payments easier.
3) It makes me feel accomplished the closer I get to paying off an account.
I sincerely hope reading this has helped you in some way. The one thing I want you to remember if you don’t remember anything else is, to KEEP TAKING BABY STEPS you will get there eventually. If you enjoyed reading this share it with someone you love. Also check out the 5 Tips to #GetYourFinancialLife
Be bold. Live out loud & as always remember,