Taking a loan to finance your education is the most common thing to do. It keeps you on your feet and independent. But the dark side is that you are taking on debt that may last you decades into the future. The average debt of a Canadian student after completing graduation or post graduation is $28,000. I’ve recently come across on an article on CBC news Canada where a post graduate student from 2008 managed to only pay off $2000 of her pending student debt. The average estimate for paying back student debt is 14 years!
Student debt is an issue not to be joked about. You can’t just say, “I’ll start paying it off once I graduate and get a job”.
Here’s my advice to those students who want to do something about their student debts now.
Put a Budget Together
Now is the best time to pick up on the habit of budgeting. It will not only come in handy now, but for the rest of your life too.
– Keep track of your expenses. With a smartphone, there are many apps you can download that will help you out.
– Review all sources of income you are getting form your parents or part time jobs. It is important you know how much you are earning in a month and never let your expenses exceed that.
– Evaluate your expenses. Find out what you can cut down on. Do you have too many outings in a month? Is your food bill too high?
– Plan for the next month. As much as possible, decide in advance where your money is going to go – food, debt, tuition fees, etc. This way you push yourself not to exceed your spending.
Budgeting is your best tool to managing debt.
Create Two Bank Accounts
To help stay in line with your budget, create two bank accounts. One should be for necessary items like rent, tuition, supplies, etc. The other should be for your personal spending like food, transportation and entertainment. This helps keep your money organized.
Be Smart with your Credit Cards
Credit cards are not giving you free cash so stop resorting to it everytime. The worst part is that every time you use it, you are not just paying the money back, you’re paying it with interest, in case you don’t pay back on time. Use it only when you need to, rest of the time make it a habit to use cash.
– Pay the Full Amount Regularly: Make sure you pay the full amount at the end of the month without fail. You have a planned budget to ensure that you have money in hand to pay the debt.
Watch your Credit Score
Your credit score is a good indication of where you stand with your debt. Every six months or at least once a year, have a look at your credit report. It tells you how regular your payments are, if you’re falling behind on your debt payments, etc. Aim to keep your credit score at about 700.
Student debt is not something that you can deal with later. Start tackling it now and your life will be easier in the future. If you want advice because you are not getting ahead in your debt payments, talk to a 4Pillars debt consultant and they should be able to help you with that.
