Once upon a time, I walked into an educational institution wearing cargo shorts and carrying a pen, one hundred dollars and a whole lot of excitement. Four years later, I walked across a stage carrying a diploma, intelligence, confidence and a whole lot of debt. Many people lie in bed each night with a sunken stomach worried about their student debt. I hope this short read helps to simplify the complexities of others’ personal situations, whether deep in debt or with very little left to go. Everyone is in a different spot – it’s important to develop a personalized game plan that empowers each situation with the best opportunity for both success and comfort along the way.
Here’s the deal: I can’t write a blanket statement or give you a simple step-by-step instructional guide to better your student debt situation. Why? Because like I said, everyone’s in a different spot. However, I can give you a few tips and focus areas that will help you to start striding in the right direction. Let’s start with a quick discussion on interest, continue with few pin-pointed questions and then finish with a few points for remembrance.
The Quick Discussion on Interest
Interest is not a bad thing. It’s calculable & predictable in terms of your student debt. The question becomes, is it worth it to save money and earn interest on that? Or is it better to pay off loans aggressively in order to mitigate the interest accruals over time? There are multiple variables necessary to understand in order to answer this question.
A Few Pin-Pointed Questions
- How do you file your taxes? Single, married filing jointly, married filing separately, etc.
- What is your current income?
- What is your loan interest rate?
- What type of return do you assume you’ll earn if you save money instead of paying off the loan(s)?
There are more variables to consider on top of these, but this is a start to piecing together your student debt puzzle. Here’s what’s worth remembering:
A Few Points For Remembrance
- Always pay your minimums. Whether you’re investing money to save for the future or immediately putting every penny back to pay off your loans, hit your loan payment minimums. Why? You don’t want to end up in default. It’s as simple as that.
- Check out refinancing and consolidating. What does this mean?
If you have more than one loan, you can actually combine your loans into one sum by opening a new loan (consolidation). Along with this, you may be able to lower your interest rate (refinancing). It makes the complex simpler by combining everything into one standard rate and location. And more importantly for you, it can save a lot of time and money.
- Interest on qualified student loans is tax deductible, meaning in your tax return you can earn back a portion of what you paid each year.
Fun fact: you can deduct up to $2,500 worth of interest every year!
- If you are fortunate enough to have an employee benefit like a 401(k) that offers a company match, always contribute to your plan. It’s a free and simple way to double your dollars.
So What Do I Do?
What’s the answer to this question? Should you put more money toward your loan payment(s) or start investing? Unfortunately, the answer is, “it depends.” If you find yourself often thinking about your finances and feel that uneasy drop in your stomach, I’d highly suggest contacting someone in the field of personal finance to help you out with this. Not only will it help address your student loans, but it will also help you plan for the future: purchasing a car or home, getting married, having/raising children, going on that big vacation, retiring, insurance, taxes, starting a business, developing a will, etc.
Why is it worth your time and money to consult a financial professional? Regardless of your age, a financial planner is a life coach. They take the various aspects of your life, emotional and physical, and help you to understand what you can do to pursue your goals. Do you feel like you’re locked into a cycle, paycheck to paycheck? Do you know if you’re saving enough money or paying off enough debt? Have you ever thought about when you’ll be able to retire or take that big vacation? And do you want to feel secure about your life again? No matter your answer to these questions, stop trying to convince yourself that this is something you should handle on your own. It’s not worth the stress, time or lost sleep.
Paying a small percent of your account to a financial planner can make up for itself quickly in the value you can accumulate with a sound investment strategy that’s tailored to your situation. More importantly, a financial planner is somebody to talk to during times of confusion. They’re available for you every day, and their job is to understand you. A financial planner takes you from Point A (today) to Point Z (death). All you have to do is decide what the rest of the alphabet looks like.
Carson Wealth Management has a large team of qualified fiduciaries who are required to put your interests before their own. They connect you to a financial advisor who fits your personality, so that they’re able to understand your desires. With this comes a relationship that allows for a lifestyle that seeks to exceed your expectations, but also gives you a partner who isn’t afraid to tell you when it’s time to slow things down.
Carson Wealth is the #9 ranked Advisor in 2016 by Barron’s. Please call us at (888) 321-0808 or schedule an appointment here.
*The ranking reflects the volume of assets overseen by the advisors and their teams, revenues generated for the firms and the quality of the advisors’ practices.
