You finally did it: You’ve graduated from your university or college program—congrats! Your hard work has paid off, but now it’s time to start thinking about paying something else off: your student loans.
According to the National Graduates Survey of Canada completed every five years and last in 2015, 49 percent of graduates owe money for their education at the time of graduation. And as happy as the bank or government was to loan you this money in the first place, they’re just as eager for you to pay it back. Like, immediately.
To avoid eating nothing but instant ramen for the next five years as you deal with high interest rates, it’s important to get a handle on your student debt and make a plan to pay it back as soon as possible. Keep reading for a few tips to start tackling your student debt.
Know what you owe
The first step in dealing with debt is knowing exactly the amount you owe and the terms and conditions surrounding the loan. You should be clear on the type of agreement you’ve entered, and the timeline you have to pay it off—some loans are interest-free the first year after graduation, and others may have higher or lower rates depending on various factors. Make sure you have a thorough understanding of your financial situation, and be sure to speak with a trusted advisor if you aren’t confident in your knowledge of the subject. You don’t want to be penalized or charged extra fees simply because you don’t understand the specifics.
Make a plan—and stick to it
Whether you put aside a portion of your paychecks each month, pick up a babysitting or bartending gig on the weekends, or simply cut down on spending, you need a plan in place to tackle your debt. One strategy is the debt-snowball method, in which you list your debts from smallest to largest, and start by making minimum payments on all your debts except the smallest one. Meanwhile, pay as much as possible off the smallest debt, and when it's fully paid off, immediately start doing the same for the next smallest. This way, the money you were initially putting toward the smallest debt can be rolled over into tackling the larger debts, letting you contribute more and more until all your debts have been paid. This method can have an encouraging psychological effect and helps gain momentum when reducing multiple debts.
Live your life
Although it’s important to focus on paying down debts as soon as possible, it’s also not a good idea to become too focused on your debts that you forget to live your life. Do your best to fit your debt-reduction strategy into your lifestyle—buy a new pair of shoes when you need them, and leave room in your budget for dinner with friends or a trip to the movies. Part of being financially responsible means living a happy, balanced life while doing so.
For a deeper understanding of loans and how they work, or to make a plan to tackle your debt, connect with a trusted debt advisor or consultant on Vexxit today.