Contribute early and often. This is absolutely essential and here's why.
They Contribute. You Contribute. If your employer has a matching program for your retirement account then try to contribute at least as much as they're contributing. Not doing so is turning away FREE MONEY!
Save as much as possible. Try to contribute as much as possible. At a minimum contribute at least 10% of your pay. If that's too much for you right now, start small and every six months bump up contributions by 1 to 2% until you've maxed out your contributions for that year.
Take it with you. When you switch jobs make sure take your contributions with you and roll over your account.
Automate it. Setting up automatic contributions to your retirement account whether a 401(k) or IRA is a great way to ensure that you continue contributing even when things are tight
We are assuming you will need 80% of you current salary to live off of and that you will continue to save the same percentage from now until 65 years. For more details on our calculation please see the terms and conditions.
You may think it’s no big deal to miss a loan payment, but before you dismiss this important responsibility, read on about the consequences resulting from loan mismanagement.
You probably signed for this loan when you were 18 and did not understand how this works, so we will explain it. When you borrowed from a lender, even though it is for a college loan, it is a real loan with real legal terms. All of the fine print on that loan document had rules and regulations regarding the loan you were given. Even if you didn’t read it you are still bound by that document and all that fine print.
Below are some general things you NEED to know about private student loans. They vary by lender and tend to be less extreme for federal loans, but generally the stipulations are the same so we will use Sallie Mae (who is a private lender) for our example.
Issues with student loans are serious stuff that can impact you for years to come. If you need help, check out our links for other resources that are available or reach out to Mr. Moneyboar
It might be a reason to look into consolidating your loans, since about a 50-100 point increase in your credit score can result in a lower interest rate. Check out our links for where to go to check your credit score and report.
It can make it easier to keep track of what you owe and your payments by consolidating your debt into one monthly payment.
You will have a lower payment if you extend the term of you loan, BUT you will end up paying more for the loan if you do this. This should be considered if you having difficulty making your monthly payments.
Depending on your loan the cosigner can be released if you make consecutive on-time payments (time frame can range from 12 to 48 months).
Considering consolidating your student loans? Student loan consolidation can make repayment much easier by consolidating all your loan payments into one payment. Before you do anything though there are a few things you should consider.
Fixed rates will stay the same and can be advantageous because you can lock in a good rate and you will always know what it is. The downside is when you lock in a high rate and then rates are suddenly lowered. In this case, you are stuck with the high rate. Variable means the interest rate will vary. Variable rates tend to be more risky as they will vary with interest rate changes.
Be sure to read all that fine print. If you are unsure of what it says, ask first. There can be substantial fees associated with loan consolidation so make sure you know what it cost before you agree to anything.
Prepaying your principal is a great way to get ahead on paying down your debt. Make sure they allow prepayment of principal and there is no fee for doing so. If they don’t allow prepayment I would look for a different option. They won’t advertise this information so you will find it in the fine print or by asking.
Note: You cannot consolidate private and federal loans into one payment. Federal and private student loans stay separate.
Need more help? Whether you want information on consolidating your student loans or paying off your student loans, we are here to answer your questions.
If the plan to tackle your student loans is not working then check out some options below. Also, be sure to call your lender to see what they suggest you do if you are struggling to stay ahead of your payments.
Allows you to postpone repaying the principal of your loan for a certain amount of time. (There is Deferment for Economic Hardship and Active Duty Military.)
Postpones payments, but only a year at a time, and interest will still accrue, adding to the total owed.
*** You must not default on your loans to have these options. So if you are considering this continue to make ON-TIME PAYMENTS UNTIL you have received WRITTEN NOTICE you have been approved for Forbearance or Deferment***
Check out OUR links section for more information!
Federal student loan Repayment options (other than the standard 10 year term) according to studentaid.edu.gov:
This plan allows you to extend the length of your loan from 10 years up to 25 years if you owe over $30,000. This will give you lower monthly payments but it will cause you to pay more in interest over the life of the loan.
This plan will start out with low monthly payments but they will increase every two years over the course of the 10-year loan.
This type of plan takes into consideration your income and family size to determine your monthly payment. The positives of this repayment plan include: pay as your earn, interest payment benefit, 25-year cancellation, and 10 year public service forgiveness. The negatives are you will pay more interest and you must submit annual documentation.
Only for direct loans. This plan bases your monthly payments on the combination of your adjusted gross income (also known as your AGI), members of your family, and the amount of your loan. The length of this repayment plan can be no longer than 25 years.
Only for FFELSM Loans. It is similar to the other repayment plans except the only consideration is your income, which will determine you loan payment, it will increase or decrease as your income does. The length of this repayment plan is no greater than 10 years.
Come up with a plan to pay back your student loans, they will not go away! If you make late payments or don’t pay at all this will cause serious problems. Also, if you are only paying the minimum you will feel like you are treading water and not even putting a dent in your loans. Here is our PLANANCIAL for Student Loans.
Even if your lender never notified you that you need to pay, it is your JOB to get in touch with them and find out what to pay, when to pay, and to whom. The lender is NOT responsible for getting in touch with you. Especially, if you switched schools or moved it is your responsibility to tell your lender. The lender will not “forget” about the money.
I know it sounds old fashion but I recommend getting a binder to keep track of all your documents. In the binder keep the original loan documents (read them too so you know what is in that fine print), any correspondence with your lenders, and records of your payments.
If you are only paying the minimum payment then figure out how much extra money each month over the minimum you can put toward your loan. If you can’t pay extra money every month you should put bonuses, birthday gifts, holiday gifts, and any extra cash you have coming your way toward this. Then try at least once a year taking extra money and applying it toward prepaying the principal. YOU MUST NOTIFY THE LENDER THIS EXTRA MONEY IS TO GO TOWARD THE PRINCIPAL OF YOUR LOAN IN WRITING. If not, they can treat it as an early monthly payment. This can happen with mortgages too. Put this letter in your student loan binder (see step 2) so you have a record.
That’s right, another one. Waitress, bartend, babysit, freelance, do odd jobs. Do what ever you need to. It might not seem like fun but it will be a lot more enjoyable then defaulting on your loans or paying them back for your entire young adult life. Do you really want to have student loans when you are in your 40s? This will allow you to pay down your loans faster and it will be worth it, trust me. (So you know I am not just dolling out this advice I follow it, I have TWO jobs myself.)
If you can’t get another job, then take a look at your spending and see where you can save some money that you can put toward your loans. Check out our budget tool to see where your money is going and where you can save.
Make sure you are taking advantage of all your student loan tax deductions and tax credits. I would advise you hire someone to do your taxes for you to make sure you take full advantage of all the tax credits and deductions available to you. Do not go to H&R block they are OVER-PRICED. Find a local CPA near you and that will probably cost you $100-$200 (no hidden fees) and it will probably save you hundreds of dollars. You can do it yourself I am sure. But do you fix your own cavities or go to a dentist? CPA’s are professionals and are up-to-date on all the tax laws. It’s worth the money.
This might seem obvious but I would not recommend tacking on additional loans to your current obligations if you can avoid it. Wait until you pay off your current loans before you take out more debt. It will most likely allow you the perspective after paying off your current loans to see if that graduate degree or doctorate is really worth the price tag.
Albert Einstein said that it is “the greatest mathematical discovery of all time.” Understanding compounding interest is fundamental to understanding how to be successful in your personal finance life. If you have $10,000 today with a 7.2% return compounding (compounding interest) you would have $20,000 in 10 years without adding any more money. Compounding interest becomes even more powerful with more time.
In order to plan to reach your financial goals you need to understand where you are starting. Do you have debt? What is your interest rate? How long to pay it off? Do you have assets? How are they invested? Are they properly allocated for your goals? It is important to take the time to sit down and see where you are starting to know how to reach your goals.
Most people think they have purchased insurance when in reality it was sold to them. Take the time to understand what your insurance needs are, what the best product is, and purchase what you need at the right price.
This is a basic one but you have to have a budget if you want to be successful financially. The wealthiest people got to where they are by spending less than they make and investing the difference wisely.
You need to know your credit score, understand how it is calculated, and work to improve it. Your credit score will have a huge impact on your financial life for the rest of your life.
Start planning for it now. You don’t need a lot of money if you have a lot of time. You most likely will be responsible for securing your own retirement so start planning for it today so that it will be a reality and not a dream.
Make sure you understand how the important legal documents work and that you have the correct ones for your situation. For example, do you have beneficiaries on your retirement accounts, do you have a will, do you need a guardianship provision?