Smart Personal Finance Tips for Young Adults Tackling Student Loans

If you are a young adult, managing your personal finance more often than not is usually challenging, it’s even more difficult if you are being faced with paying students loans, your rent and other expenses.

However, there’s some good news, there are some solid plans and few strategies you can easily employ to take absolute control of your finances, we’ll analyze some simple practical tips that young adults with students loans can use to stabilize their financial targets.

1. You need a better understanding of what’s involved in Your Student Loan

The very first step you need to take when you have a loan is to understand everything entailed in that loan. make sure you know the following:

How much you owe:Knowing how much you owe is extremely important, i mean how will you know what to pay when you don’t know how much you owe? to know the exact amount, simply log in to your loan service’s official website or you can use the National Student Loan Data System to find out your total balance.
Your interest rate:If you have a higher rate, it only means one thing, you’ll pay way more over time, to be on a safer side, you should always keep track of your interest rate.
Your repayment plan: Are you on a standard repayment plan? or will you repay on income-driven or extended payment? each of them have different plans, so it’s very important you know which one you are on.

2. Make a Budget

If you want to manage your money effectively, Budget is the best roadmap you can follow Here’s how to create one:

Track your income:If you have some sources of income, make sure you write all of them down, any means that brings income to you should be taken note of, it could be your salary,support from family and friends, and other side gigs.
List your expenses: You should break down every expense you make, you can break them down into two categories, Fixed and Variable expenses. Fixed expenses which involve your rent,loan payments and insurance. and Variables which involve groceries, entertainment and shopping.
Set spending limits: There should be a limit to how much you can spend, you should allocate money for your needs first, then your wants and finally savings. you can make use of tools like Mint or YNAB, these tools will help you to keep track of your spending and also stick to your budget.

3. Prioritize Paying Off Debt

Obviously from time to time you’ll get overwhelmed by the fact you’re still owing student loans, however you still need to put a very good repayment plan in place to help you meet up. here’s what you’ll have to do:

Make more than the minimum payment: You have to put in more effort and make more money than the minimum payment that’s expected of you. even an extra $50 can reduce your loan balance faster. so try and make as much more as you possibly can.
Pay off high-interest loans first:In loan there’s something we call avalanche method, it’s the process of paying off high interest loans firstly before others. if you have lots of loans to pay, you should focus mainly on the one that has higher interest rates, that way it’ll be faster and less expensive.
You can Consider refinancing:Refinancing is good for those that have steady income and a good credit, what it does is that it reduces your interest rate and monthly payment.

4. You can Build an Emergency Fund

When You are faced with an issue that wasn’t planned, maybe an emergency, you need some funds in place to take care of it, that’s where emergency funds comes in, it is a savings account that can act as a safety net for your unexpected expenses let’s say car repair or medical bills.

your target should be to save at least 3-6 Months worth of your living expenses. For you to get started:

you can set small, realistic goals (e.g., save $50).
Try to automate your savings by making sure that you transfer a certain amount of your paycheck to a separate emergency fund account.
You can make use of apps like Digit or Acorns to help you save your spare change automatically.

5. Live Below Your Means

When we say live below your means, we aren’t saying you shouldn’t spend or get what you want, all we are saying is, since you know you have a student loan to pay, there are some expenses that aren’t necessary and you shouldn’t make such expenses.

Living below your means simply entails that you should be spending less than you earn. If your monthly income is $500, your income monthly should be less than that. it is what living below your means is all about

Here are some tips that I believe would be helpful to you:

Try to avoid lifestyle inflation: As your income increases, don’t let your spending increase too, that way you can save some money and service your loan.
Cut unnecessary expenses: If you don’t need that subscription, cancel it, If that shirt or sneakers is not a necessity for you, don’t buy it, reduce how frequently you eat outside.
Buy second hand: I know you might be tempted to acquire brand new properties that you need, but since you are paying a loan and fighting to save your finances, it wouldn’t be a bad idea to go for secondhand properties instead of brand new, for things like your clothes or electronics, you can consider thrift stores or get them in online marketplace, these will certainly reduce how much you spend and definitely increase how much you save.

Final Thoughts

Taking Loans for school could actually help you to reduce your financial burdens, but in the longer run, you’ll still need to repay these loans and maintain your credit score.

We’ve been able to give you some tested and trusted tips that would help you save and pay off your Loans, these tips have worked for others, there’s no way it won’t work for you too if you are dedicated.