During the pandemic, many were able to pause payments on their student loans, but payments might be starting up again with little forgiveness. Adding this expense back to your budget could mean you need to get creative with the rest of your monthly spending.
Manage your budget
Planning for payments again could be a huge hit to your monthly budget. One of the first steps you should take when payments pick up again is reestablishing your budget. Where do you allocate funds every month so you can pay bills?
Take a few minutes to write down where you spend your money. You might find different places where you can scale back and redistribute funds. Several little changes in your daily spending like making coffee or lunch at home or getting rid of a streaming service you aren’t using can help you find a few more dollars that can go towards your student loan.
Consolidate debt where you can
With your student loan payments or any other debts that you have, it is worthwhile to ask if you can consolidate the debt to one loan. This will usually create one, lower monthly payment and interest rate for you to manage. If this isn’t an option, you might consider a debt management tactic known as snowball versus avalanche payments.
The snowball debt payoff strategy starts with paying the minimum amount on all your bills, while also putting as many dollars as you can toward the smallest debt balance each month. Once the smallest balance is paid off, repeat the process with the next smallest debt balance.
With the avalanche debt strategy, you pay the minimum due on all your bills, and pay as much as you can on the balance with the highest interest rate. Once the balance with the highest interest rate is paid off, start paying more on the next highest interest rate debt.
Stretching your paycheck
With payments coming back and inflation at record highs, many people are feeling the pinch on their paychecks. Getting creative when you go to the grocery store can help you save a few dollars and signing up for gas station loyalty programs, if they exist in your area, is also a small step you can take to try and stretch your paycheck.
Don’t stop saving if you can
Many people enjoyed the chance to save a little extra money the last two years, but with repayments restarting and social calendars filling back up, how much you are able to save might have changed. Even if the amount you can set aside has decreased, don’t stop saving. Every little bit helps and will add up over time.
It is also important to continue building your emergency fund in case a worst-case scenario happens.
Establishing a new budget and payment plan takes a little bit of time, but it is an important step for your financial wellness. A banker can also walk you through your specific situation and help you determine the next best steps for your goals.
UMB personal banking solutions offer convenience and simplicity to meet all of your past, present and future financial needs. From home loans to auto financing and everything in between, see how UMB personal banking can work with you to find the right products for your life and lifestyle.
For additional tips on managing student loans, take the debt management module in the UMB Financial Education Center.