Loan Budgeting Tips

A Multi-Pronged Approach to Debt Freedom

Getting your college loans consolidated into one simpler payment is only the first step to managing your debts effectively. There are other time-honored strategies for handling your finances in a way that will keep you independent, financially secure and as stress-free about money as possible.

After Consolidation - Start Saving

Once you find the peace of mind that comes with consolidating your student loans, you should, if you haven't already, begin to build up a small savings account of $1,000-$2,000 for emergencies. This money should go into a simple, interest-bearing savings account where it sits and waits for the next emergency that life throws at everyone from time to time. Not only will having this money bring you a peace of mind in knowing you can handle many things as they come up, but it will also provide credit benefits.

After Savings - Start Paying Off Debt

Once you have that small emergency fund safely tucked away, you should get nuts about paying off your debts. Credit card debts, car loans, and your new consolidation loan as well. Everything you owe except your home, if you have one, you should throw every extra dime you have at getting rid of, starting with your smallest debts first. Once you've paid off a small debt, take the payment you were making to that and roll it over with your extra monthly income into the next smallest until it is paid off, and so on, and so forth, until you are completely debt free.

Once you are free - Start Really Saving

Save for that big vacation you always wanted, start saving for retirement, start saving up to buy a new car with 100% cash down. You will find that with all of your debts paid off, you have so much money every month that it is tempting to just blow it on going out to eat regularly, or the movies, or whatever other interests you have. Best thing to do is to stay on a budget, however - sit down with your spouse if you have one and decide in a lucid moment what things you want and how much of your extra money each money you are going to save up for each one until you get them. If you want to designate some money every week to eating out a certain number of times, that's fine, just make sure it's in your budget. For more information, see why you should consolidate college loans today.