It might not sound appealing to live on a college budget, even after you have graduated. But if you want to repay your student debt quickly, this is the smartest route to take. We get that having a bigger salary is exciting and you probably want to buy things you weren't able to in college. But, we recommend that you continue living like a college student before you start to enjoy life's luxuries and until your debt is repaid. Example: skip out on the fancy dinners and the brand new car and allocate that money towards your student debt. We've gathered some tips and other daily savings tricks to help you stay on track and sail towards debt freedom faster!
You've been living on a limited budget for the past few years, so why not continue to live this way? We don't recommended you splurge on luxury vacations, a new wardrobe, or other expensive items just because you got a significant pay increase. Take a step back and look at the big picture. Where do you spend most of your money? Rent, utilities, food, debt, savings, and insurance are all necessities, so we get that it can be hard to cut back on those, but there are ways. Check out this budgeting calculator to help you lay out all of your expenses and start coming up with a plan.
Keep budgeting simple with this formula: Subtract the value of your monthly savings contribution (emergency fund/long-term goals), your bills, and expenses from your monthly income. The difference, whether it’s $20 or $2,000, is what you can spend on entertainment, retail, food, and other fun stuff.
Move back home with mom and dad
Get a roommate or two
Find Affordable Housing
Now that you have a salary with steady pay it might be tempting to put some of it towards nicer housing. Housing is likely one of your biggest expenses and you can save money by finding some roommates to split the cost of living with. Not only are you paying rent, but you're also paying for electricity, oil/gas, water, and maybe even renter's insurance. Finding roommates to share the financial responsibility with can be a smart way to save up some money and put the extra towards your student debt. You can save $400 - $500 a month by living with roommates as opposed to living on your own.
Save, Save, Save!
While we want you to enjoy your hard earned money, one of the biggest mistakes that new graduates make is not saving for emergencies or retirement. Employers make it easy for you to save by offering a direct deposit into your savings account. Allocate a certain amount from your paycheck to your savings. It is best practice to save about 20% of your paycheck. Skip out on the daily $4 coffee from Starbucks and make it at home for $0.25. That's like saving $112.50 a month!!
If your employer offers a 401(k) plan or something similar, contribute as much as you can – ideally at least enough to get the maximum employer match. Don't leave free money on the table! The earlier you start to contribute, the better! The difference between starting to save at age 22 vs. 30 could be hundreds of thousands of dollars!
Daily Savings Tips
- Make your coffee at home (if you want to treat yourself with a coffee from your cafe, bring your own mug and they'll likely give you a discount)
- Carpool or use public transportation to get to work
- Pack a lunch for work
- Cut back how much you dine out in half (4 times a month to 2 times a month)
- Pay bills on time to avoid late fees
- Turn off lights and unplug electronics when not in use
- Have a snack before you go food shopping
- Buy the store brand as opposed to the name brand
- Go to your local library to take out books and movies for free
- Comparison shop before making purchases
- Become aware of free and local events happening near you
- Go in on a membership to a museum or gym with friends
- Wait at least 24 hours before making purchases-you'll often find you forget about them instead of spending your hard earned cash
Hopefully, we helped you realize that it isn't difficult to live on a college budget, but by doing this you can save money and repay your debt down even faster. If you're looking to cut your costs even further, consider refinancing. Refinancing your student debt might be able to help you reduce your student loan interest rates which can lead to big savings!