What Student Should Do To Stay Away From Debts
As a student, it’s easy to get caught up in the excitement of being independent and the many benefits that come with the freedom that comes with it. But it’s a difficult situation to stay aware of how this kind of freedom can lead to excessive spending, which can result in unnecessarily accumulating debt that you may have to cope with after you’ve graduated.
These little costs can quickly add up and leave you with mounting debt at the end of the semester or academic year. To avoid debt as a student, follow these five tips and learn how to manage your income wisely so that you can have fun without breaking the bank.
1) Start With A Monthly Budget
Whether you are wealthy or not, the budget you are working with for the month will decide how much you can spend. If you do not know where your money is going, it can be too easy to rack up debt or to make purchases that may not seem to matter, but which really add up over time.
Always prepare a monthly budget, including income and expenditures. Monitor where your money is going to find out what expenses are normal and then be ready to make adjustments if needed.
There may be one area in your budget that you might need to reevaluate, if your budget plan needs more attention or if there are differences in the income coming in and the income going out.
But if you learn to anticipate spending, time your purchases, and keep track of your expenses, both areas will work together smoothly over time. If you’re spending $400 each month on eating out and have only $600 left at the end of the pay period, it’s time to make some changes.
Your budget tells you not only what is happening now, but also what will happen in the future. in addition to just covering future months, it also aids in planning for any number of other eventualities.
2) Write Down Your Goals
There are two good reasons to keep your goals in writing.
First, by having your goals written down you are ensuring clarity about what you want for yourself.
Second, the written goals can be an excellent starting point to allow you to explore new options and make wiser decisions. Without it, you’re more likely to be lost and confused about where you’re going.
This will likely set you up for frustration and failure down the road when your goals are not realized because they were never properly planned. Second, recording your dreams down will make it easier for others – family, friends, mentors, etc. – to support you during your journey because they will know exactly where you’re headed.
And that kind of support is invaluable! You may not know how to best achieve your goals, so try making a vision board or even jotting them down on an index card.
Do whatever helps you achieve your goals! Just set those goals, so you can see them every day and remember why you’re working hard to achieve them.
When you write them down, you’ll need to review them from time to time, adding new ones that may pop up. When you are stuck, we’ve got some tips to help you set the best goals for you. Check them out, and feel free to ask for input from others! Looking at lists helps keep you accountable and is a chance to get ideas.
Having someone else look at your list refreshes the memory and may force you to think about things you wouldn’t on your own. Sometimes it just takes a little nudge from a close friend to help us set our focus. Don’t forget to celebrate your successes, because that encouragement can make all the difference!
3) Get An Emergency Fund
If you have no money in your bank account, it’s easy to feel as if you’re making enough money to pay your rent or pay off student loans in small installments every month.
But that type of thinking is the reason people often find themselves in trouble with their credit cards or loans. The easiest way to stay out of credit card debt is to start a financial cushion by adding money to your savings account with each paycheck until you have three to six months of living expenses on hand.
If an emergency comes up—like it does for everyone—you’ll be able to easily take care of it and won’t have to turn to dangerous and expensive credit cards or cash advances. Furthermore, when you borrow money for school, make sure it comes from a government loan program.
Federal Stafford Loans, in particular, offer flexible repayment options including income-based repayment plans that can make payments much lower than those for the standard repayment plan, even after accounting for interest over time.
Not only are federal loans less likely to go into default because of serious consequences if you don’t pay back what you owe, but remember that when you have paid your school off and eliminated your debt burden, there are a number of other ways to save money.
To ensure you’re financially ready when future emergencies happen, put some of those excess dollars into retirement savings or an emergency fund. Putting away 15% of your annual income makes sense for most people.
If you try to save 20% right now, you might be scoffing at the idea, but actually it’s pretty simple. Let’s say you want to save $20 per day on average. Put in $2 per day or $30 per week, and before you know it you’ll have enough money to protect you in the case of an emergency.
Saving can be hard, but sacrificing now to save more for the future is worth it in the long run.
4) Set Aside Savings Every Month
If you’re only barely making ends meet, you might be tempted to postpone saving your money. But if you can spare a little money, it’s a good idea to do so now. It’ll be easier to avoid sudden financial disasters.
For example, if you suddenly need to visit the ER or your car needs expensive repairs, you’ll be better able to handle it since you’ve set aside 10% of every paycheck in a separate account for a time like this. In that account, you can let the money grow and pay yourself later. Just make sure you keep this in a special account.
With automatic deposits from every paycheck, you won’t need to think about it very much. It would also be beneficial to save a set amount of money every month in a savings account and try not to be stingy when you take it out for the bare necessities.
It’s been proven that a strategy like this has an increase in savings rates among people who typically impulses spend. That doesn’t make or break any budgets, but it’s better than nothing. Small contributions over time can amount to large amounts of money.
If you want to make sure you don’t spend too much from your savings, set up a new bank account specifically for those funds.
5) Know What It Costs To Repay Loans
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It’s hard to understand your situation with debt as a student without fully understanding how much it will cost you to repay your loans. Some schools may be unclear on disclosing the cost of their loans, but you should be sure to fully understand how much each loan will cost you.
This can be accomplished by visiting your school’s financial aid office and obtaining an estimate of the total loan payment cost, factoring in tuition and textbooks to determine the average yearly cost.
There are several calculations that need to be considered, including multiplying the initial tuition cost by four. Additionally, we must account for income. If the resultant figures are too expensive for you, look at whether a school offers a payment plan.
By adding 10-15 years to the cost of paying off a student loan, the figure becomes far more manageable. Remember: the less debt upon graduation, the better. Debt limits one’s sense of accomplishment. Payment on debt reduces options for savings and living in the future.
Remember: Freedom from debt makes thinking long-term easy. And isn’t that never a bad thing?