Students are most prone to fall into hard hands of debt. To squeeze out is a real pain. But know how to manage them early in life to get a good boost for your hassle-free future.
Quick is not a word you can use in clearing debts, especially if you have just got out of college and plan to do the sweeping yourself.It does take time.For some, it could take 3 years to get rid of, for some 5 years, or for some as little as a couple of months.It depends on you, what methods you are about to take, what changes you are about to make.
1.First, understand your debt:
Since you are making a big decision to wipe out debts, it is very important to get a clear picture of what type of debts you are having.Calculate how much you owe in total.I guess the big one you have hovering around you is the student loan debt.Also, if you have credit card debts, don’t ignore them. Take suitable steps from now to stop the balances bouncing up.Sum up those that you want to get rid of first.After you have figured out your debts, get started.
2. Start making a decent income:
There’s no shortcut.You need funding. Only cash can drive out cash. Not sympathy, not emotion, not time.If you sit back and wonder that one fine day, you will have zero balance on your cards, no student loan debt, fine salary, cozy night outs, chilling with friends, then you are thinking too much and doing nothing.Everyone starts with little.Get a job, start your savings, and save as much as possible, then start to shoot debts.You need a consistent flow of cash if you want to handle debts seriously.
3. Start to budget and start to save: Most rich people have rich money habits. Some less fortunate people have poor money habits.This is the harsh truth.There’s no way you can achieve your monetary goals if you don’t practice good budgeting and proper spending habits.Sort your necessities and cut down unnecessary expenses.You can take a year’s time to earn a handful amount of cash, and clear out some of your debts and then plan for further degrees if you want.You can also shift back to your parents while you deal with your debts. This will help you to cut down some basic costs.Chalk out your expenses.You can follow the 50-20-30 budgeting rule, at least I recommend this method, and also follow it myself.This is pretty easy to do, and yourself being a recent graduate, can find this one appropriate.As you start to earn, keep aside 50% of your income for day-to-day use, like grocery, transportation, utility bills, and so on.The 20% of your income should be put towards savings. There’s no compromise on this part.The remaining 30% is what I call flexible amount. You can either use it to party and make expensive decisions and if you are smart enough, you can use it for savings or other important factors, like making extra monthly payments for your debts.Here are some 30 ways to save money each month.
4. Cut down the credit card usage:
Credit cards come with the highest interest rates.With late payments and overlooked balances, the debt could bump real high, even before you know it. So use cash for your most purchases.Now let’s say you already have big debt amounts on your revolving credits.What can you do?Well, you can try out the debt snowball method, as proposed by Mr. Dave Ramsay.You arrange your credit card debts in an ascending order, from the lowest balance to the highest.Make the highest payment on the lowest balance.As you do so, you will clear out the lowest debt in little time. Say you have 3 credit cards:
- Credit card 1: Balance- $1000, monthly payment- $50.
- Credit Card 2: Balance- $2000, monthly payment- $75.
- Credit Card 3: Balance- $3000, monthly payment- $90.
For the first card, if you start to put an extra effort of $400, and make payments of $450, you will clear it out in no time.So you are done with the first card.Now for the second card, make a payment of $525 ($450 + $75 usual monthly payment). After you are done with the second, pay $615 ($525 + $90) for the third.This is a very effective way to deal with debts.You can also combine your private student loan to this payment method and get away with it.
5. The student loan countdown starts:
Some consider it to be a good debt. It has good future returns as you are investing in education.So let’s concentrate on the big ball.To be precise, there are many ways you can solve this issue.If you have a single loan, and that too a federal loan, then your worries are a bit less.You can apply for federal loan forgiveness programs.There are a few criteria, which you need to satisfy to opt for such a program. Loan refinancing is also a good option if you are getting good interest rates and chances to shorten your loan term.In case of multiple loans, you can opt for consolidating your multiple debts into a single monthly payment.
With consolidation, there are high chances that your credit score will come to a good standing when you are done with your debts.
- More tips to cut loose debts fast:
- Look out for opportunities to earn extra whenever possible.
- Stay consistent with your monthly payments.
- Don’t use credit cards for small purchases.
- Advised not to take out any more loans till you deal with the existing ones.
- Track your expenses and save as much as you can.