Pay Off Student Loan Debt, Save Money and Reach Financial Goals
Bola Sokunbi saved $100,000 in three years with a salary of $54,000 (before taxes).
How did she do it?
Three ways, she says – working really hard, budgeting and cutting expenses.
The now Certified Financial Education Instructor, author, speaker and founder of Clever Girl Finance took on a side hustle as a photographer working almost every night after her full-time job as well as weekends.
“Budgeting is key,” Bola adds. “The whole idea is to be able to increase that gap between income and expenses.” She would cut back on anything that wasn’t essential and avoid distractions.
Bola’s business, Clever Girl Finance, is a financial education platform and community for women with the goal of empowering them to achieve financial wellness. Bola gave us her insight on the immediate steps you can take today on paying down student loan debt (or credit card debt or any other debt), how to stay motivated while paying off debt or trying to save money and what parents with student loans should do about saving for their own children’s education.
When it comes to the massive student loan crisis, Bola says don’t let that discourage you from paying off student loan debt. And definitely don’t use it as an excuse. “The debt is insane, but think what can you do for yourself right now,” she says.
What immediate steps can you take to pay off student loan debt?
Step 1: Set the intention to pay off debt.
“Student loan debt could be overwhelming, especially if you’re not in a high-paying career,” Bola says. Whether you’re in student loan debt or credit card debt, it’s important to realize it is possible. “It’s all about having a strategic plan,” she says.
Step 2: Get a firm handle on your loans.
It’s not uncommon for borrowers to not even know how much they owe, who they owe or fully understand the terms of their loans. Bola recommends looking back at any old documentation from applying for the loans and pulling up your credit report to find what you owe. For federal student loans, you can use the U.S. Department of Education’s tool to find your loans.
Next, get a handle on the interest rate for each loan and understand the benefits and penalties with each loan. For example, federal loans could have perks such as being able to go on an income-based repayment plan or unemployment deferment.
Step 3: Make a game plan.
Once you understand your loans, this is where you can start to create a priority, Bola says.
One option for repayment is focus on the smallest student loan first. “With this, you can get that quick win and stay motivated,” Bola says.
The other option is to tackle the loan with the highest interest rate, also known as the avalanche method. “This will save you the most amount of money,” she says.
Pay the minimum on all loans, and focus on putting all extra money towards whichever loan you’re trying to wipe out first. And where does this extra money come from? “Downsize where you live, move to pay cheaper rent, apply for a better paying job, find a part time job, sell things you don’t need – do anything you can do to generate extra income,” Bola says.
There’s one important thing to keep in mind when making extra payments. Be sure they are going towards your principal balance. “The reason why that’s important is sometimes your extra payment will get applied to interest,” she explains.
How can people stay motivated to pay off debt or save more money?
“When you’re paying off tons of debt, it’s hard to stay motivated,” Bola says, which also applies to saving money.
Find like-minded people and people to keep you accountable. Talk with your friends that are also on a path to getting out of debt or trying to save more money. Immerse yourself in the goal, Bola says. Read books on personal finance, and watch YouTube videos.
Build in small rewards. “Build in small rewards so you can feel like you’re not doing all this for nothing,” she says.
Get passionate about your financial goals. You don’t have to be passionate about your side hustle or how you’re cutting expenses, Bola says. All you need is to be passionate about is getting out of debt or saving more money.
Should I Pay Off My Student Loans or Save for My Kid’s College?
“When it comes to your kids, they have an advantage over you which is time,” Bola says.
She points out that children are eligible for scholarships, grants and work aid, while you aren’t.
Bola recommends starting a 529 plan for your kids. “You can also start to work with them to get their grades up to get scholarships, teach them about financial responsibility, research grants with them and find the best low-cost school to minimize the cost of college,” she says.