Start Planning Early
The earlier you start planning to pay off your student loans, the better off you will be. My accountant/mother and I had spreadsheets on my student loans before I graduated from law school. If you have started your career, it is not too late to begin planning to pay off your student loans. Start now!
When you start paying off your loans, you just need to start somewhere. When I started paying off my student loans, I started with the highest payment option I could afford. I knew from the very beginning of my career that I wanted to pay off my loans aggressively, but when I started working, I started with a smaller payment. That is okay! As your income increases, your payments will also be able to increase. As the years went on, I was able to increase my payments to above the highest payment offered, and I was able to pay off my loans faster. For now, make the payments as high as you can afford.
Set a Budget and Stick to It
Everyone needs a budget, even attorneys. A budget is a plan that you make for using your money for its maximum efficiency. If you have never made a budget before, the procedure is fairly simple. Start by writing down how much money you make after taxes. Then create a list of what you spend money on. Write down your rent, car loans, student loans, food, yoga, Netflix, and internet subscriptions. When you subtract the money you spend from the money you make every month, you should have a positive number. If you have a negative number, you need to review your spending and make changes.
Because you want to pay off your loans as soon as possible, when you are making your budget examine the spending you could live without. Do you really use that gym membership, or does it make sense to purchase exercise classes per class? When I was paying off my student loans, I cut out a lot of travel. I did enjoy vacations during that time, but they were not extravagant. Once I paid off my loans, I began taking more international trips.
Every time I got a raise or paid off a loan, I made a new budget. When my income increased, I increased my student loan payments. I sometimes think it is helpful to think about whether or not you will miss the money you pay on your student loans. For example, when I changed jobs or received a raise because I was already used to living within my current budget, I felt comfortable using my pay increase to pay down my student loans. I was not accustomed to spending that money anyway, so I felt comfortable increasing my student loan payments by that amount. I approached bonuses the same way. As a rule, when I had student loans, I never spent a bonus. I simply used any bonuses to make a one-time payment on my student loans. Realistically, I had been living the whole year without my bonus, and if I had used it to pay off my student loans, I would not miss it at all.
Your budget is a tool to pay off your student loans. Once you have a budget set, just live within your budget. It may hurt at first, but once you are used to living within those parameters, you will not even think about your budget. If you get off track one month on your budget, simply get back on track the next month. If you stick to your budget for long periods, it will pay off over the years.
Your budget is meant to be flexible. Your life is not static, and your financial situation will fluctuate. Your budget should accommodate your life circumstances. During the time I was paying off my student loans, my income made drastic shifts. My budget changed along with my income. When I did not have a job for a little while, I put my student loans in abatement because I could not afford to make payments. If you are in a stage in life where you are having a personal crisis, or you recently lost your job, it is okay to stop making payments on your loans (if they are in abatement) until you are financially stable again. Temporary job loss or a personal crisis will not upset your long-term financial goals.
Live within Your Means
Living within your means simply means living in a way that you can afford. When you are living within your means, you consciously buy less than the most expensive thing you can afford. Living within your means is not necessarily a popular approach to life, but it is a necessary one. I think many people are afraid that living within their means will lead to a less-fulfilling life. In reality, however, it will lead to a more peaceful life because you will not be stressed out about money. When you are making choices to live within your means, it is helpful to remember that the person you are is more important than the car you drive or the clothes that you wear. Your possessions do not define you.
I am not saying that you must live like you are poor. You can buy nice things in moderation. The easiest way to save money and live within your means is to select reasonable places to live and reasonable cars to drive. For example, I do not live in a nasty apartment in an unsafe neighborhood. I live in a reasonably priced apartment in a good neighborhood. I do not live in the nicest apartment I could live in, but I am not unhappy with where I live.
Examine the places in your life where you are maxing your money out and when it is not necessary. Can you buy discounted clothes? Can you buy a used car? Can you start making coffee at home? Living within your means will look different for everyone, but it will allow you to live with less stress about money.
I am a firm believer that what you do with your money is more important than the amount of money you make. If you start early and set a budget, you should be able to pay off your student loans without ruining your life. Remember to be realistic about your financial situation and make the conscious choice to live within your means. You will have your student loans paid in no time!