Start Working to Get Out of Debt!

To begin getting your loans under control, earning income to pay them off, and setting yourself up for financial stability without letting debt control your life: you must first make a plan of attack. Here are four steps to start planning for how you will make your loans a worry free part of your life.

 

Understanding how loan repayment, interest rates, and consolidation work:

Many people accumulate student debt from different lenders throughout their college career, and at the end are surprised when they have more debt than they actually thought because they realize they have it dispersed in different accounts. First and foremost, get all your debt (student loans, credit cards, etc) onto one sheet of paper, including the interest rates and payment terms. Call this your student loan summary.

Consolidate all the loans possible. When you consolidate your loans, you will have the option to choose your repayment length, i.e. 10, 15, 25 years, etc. It’s sickening to think of still paying on these loans when you’re 50! Paying for 25 years also means that you are paying a much higher total in the end, since less of your payment each month is going to the loan principal. However, choosing the longest repayment option possible does not mean that you have to only make the minimum payment, just that you have the option to pay less during lean times.

Make extra money:

You can plan and save and make smart decisions with allocating your money – but if you are paying the minimum balance each month, only a small percent of your payment actually goes toward principal. Therefore, you need to make more money and increase monthly payments to get the loans paid down aggressively. To do this, I’ve been making money online through blogging and selling information products (and having a ton of fun doing it.) Learn how you can do this too.

 

Planning your budget and financial goals:

Setting a little money aside in savings should be your first task. Most people say set 3-5 months worth of living expenses aside in emergency savings in case of hard times. Aside from that, I am comfortable knowing that I have a small IRA fund, some funds for playing in the stock market in my ScottTrade account, and enough in my savings account that I could make a decision to move to another country at anytime I want, without having other income for 3 months.

A “Repayment pyramid” refers to paying off the smallest loans first. Like with consolidation, the fewer separate payments you have, the more flexibility you will have. This can be achieved faster by paying off the smallest loans first and working your way toward the biggest loans.

How much do you really need to live the life you want? This is a fun exercise: write down a summary of the life you are aiming for, 6 months in Europe, say, and then working toward a down payment on a house in 12 months. Then write down what your monthly expenses are now, and what can be cut to make your dream a reality. Be honest with your self, and you’ll see that actually life can be pretty cheap and those dreams suddenly become much more attainable.

 

What to do once you have loan repayment on “auto pilot”:

Student Loan Auto Pilot is what happens when you star making enough money on the side that it covers your monthly student loan payments. So now what? Remember that exercise earlier where you wrote down exactly what you would do if suddenly student loans weren’t a burden in your life? Time to take action! I’m traveling the world as an acrobatic stunt performer for God’s sake. Check out other success stories.