Money experts have always been our greatest credible source for answers! And every Monday, we are here to answers your complications and queries related to personal financial issues. This week’s question and the most frequently asked topic is: “How can one easily pay off the student loan while also paving the way for some investments and savings?”
This is an issue that can affect people differently, however apart from subjectivity, here are few common reviews that our experts have put up on the following question!
- It’s better to aim at a single goal at one time!
— as per CFP at Betterment – Nick Holeman,
Balancing both the things together can be very complex; thus, make sure you use the money to make the most out of available opportunities for you!
- Make timely debt payment- To avoid penalties, added interest and high charges, make sure that you pay at least the minimum due amount on your debt timely.
- Find out benefits through employer-sponsored retirement plans- some companies provide you with an employer-Sponsored retirement plan, like 401(k). If your company has any, enrol for the same and make the most of free money!
- After doing the necessary above two, pay the high-cost debt- Get rid of the high-interest debt. It is usually more than 5%, and with most people, high debt is always due to unsubsidized loans.
- Build a safety net- Now, it’s the time to save a little more for your safety net. Save around 3 to 6 month of your bill payments, monthly expenses, utilities etc., as much as possible.
- Finally, save for retirement- After doing the entire above mentioned, plan for a longer future. As you reach around 59½, you will surely have something in your 401(k), but that is not satisfactory enough. To save more for a better life later!
Nobody can get their loan disappearing in a day, but one can surely pay it off as early as possible to allow some savings in!
A few more things can be done – factorizing the monthly minimum monthly payment within the budget, using the windfalls wisely and considering refinancing!
- “All or nothing” the mantra has to be changed!
-as per Financial Expert at Student Loan Hero, Miranda Marquit,
Don’t think of doing either all or nothing! Instead of that, have a gander at your loan and saving plan. Try to reduce the amount you are paying into loans by 25%and save or invest this difference. As you are still paying the leftover 75%, this doesn’t make much difference.
Also, check out if your boss has some retirement plan schemes too! Use such schemes, take out money from loans and invest for a better future. It will give you more than what you are paying in your interests.
If possible, try to save your one-month expenses totally as an emergency fund, or let it stretch for three months! Then, once you have made the mark, you can get back on track and decide which goal completion should be your priority.