How Student Loan Debt Can Prevent You from Buying a House or Car

As a Millennial, there are many financial decisions to make as you progress in your career. Is it worth living in expensive cities like New York and San Francisco or can you find work in less-expensive suburbs? Is it possible to afford a low-paying hobby job or work for a better salary until you are financially secure? The real question is: Should you pay off your student loans or save your money for retirement?

Although some questions are difficult to answer, you can find the right answer once your financial picture is analyzed. These 6 tips will help you prioritize your hard-earned money and make it easier to manage pay off your student loans debt and save for retirement.

1. Make your minimum payments.

It is your highest priority to always make minimum payments, no matter what. For the purpose of contributing to retirement accounts, it is not worth putting off or forbearing your loans. Once you are in a stable financial situation and can make the minimum payments plus any normal expenses like rent, transport, food, etc., then it’s time to start contributing to your retirement account. The next step is to determine how you will allocate your remaining funds.

2. Calculate Your Interest Rate (s).

Although this may seem obvious, it can be complicated if there are multiple loans or multiple servicers. Consider the amount of each loan and the interest rates.

3. Prioritize high-interest loans.

A common rule is that you should pay off all student loans with interest rates exceeding 5% before you begin saving for retirement. This category includes some federal loans and most private loans. You can put more money in your budget to pay these off sooner so that you don’t accumulate interest.

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4. Consider refinancing high-interest loans.

Refinance your high-interest loan if you are currently a holder. Many lenders will offer better rates if you have a steady income, a track record of timely payments, and can refinance into loans that are below 5%. This will allow you to save more money for your retirement savings. You want a comprehensive view of how these decisions affect your chances of reaching your retirement savings goals. You can use an online retirement planner to get an idea. This will show you how your financial plan today will affect your retirement.

5. Find out about your employee benefits.

Many employers offer incentives like 401(k), matching-if it does, you should definitely contribute at least the amount that will match. You’re wasting money if you don’t!

6. What is your attitude?

It may seem prudent financially to pay as little as possible on your low-interest loans and make contributions to retirement accounts. But, it’s also important to consider your attitude toward money. As long as your emergency fund has at least three to six months’ worth of expenses, it will give you some peace of mind knowing that your loans are being paid as soon as possible.

Bottom line

Saving for retirement and paying down student loans are both positive actions. You can optimize the way you divide your funds and get better returns later.

Comment (1)

  1. zoritoler imol
    March 8, 2022

    I haven¦t checked in here for some time because I thought it was getting boring, but the last few posts are great quality so I guess I¦ll add you back to my everyday bloglist. You deserve it my friend 🙂

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