As college students, the word ‘debt’ is no stranger to us. We see it every day in student loans, car payments and rent. But does that mean we have submit to it? No. Here are a few tips to get out of debt in a productive way:
Make a budget: Sit down in front of a computer. Don’t move until you have a budget. Start with listing how much you earn each month. You should not be spending more than you are earning. Then list in order from most to least important the bills you acquire each month. Rent, food, electricity and gas money should be towards the top of the list. Extra clothing, coffee and entertainment should be towards the bottom. Once you have your budget set and emergency savings in place (see No. 3), the rest of the money earned can go towards paying off the debt. Making sure your priorities are right is the key to a successful budget.
Stick to your budget: Sticking to your budget can make or break your journey for getting out of debt. With the amount of temptations in the material world, there are bound to be new gadgets coming out every day. For example, you might decide to use cash from your gas money fund to buy a new phone. Sure, the one you have is perfectly fine, but this new phone is just the coolest thing, right? No. Taking money that is set aside for gas to buy a new phone is a waste. What happens when you wake up one morning and can’t get to work because there’s no gas in the car? Sticking to your budget now will save a lot of stress and energy later.
Put at least $500-$1,000 in savings: This might take three or four months to do, but consider this the first debt you need to pay off— the one to yourself. This $500-$1,000 is not to be used on something you simply want and haven’t budgeted for: a new TV, clothes or a fancy night out on the town. This money is for emergencies, such as something medical or a broken battery on the car. It’s only to be used if there is no money left in the budget to cover this emergency. You don’t want to be left with a broken car or a sick kid in the hospital and unable to cover the cost. Give yourself this cushion so you don’t stress if something major happens.
Start with the smallest debt first: Some might want to start with the biggest debts first — the car payment, student loans, etc. But starting with the smallest debt and working your way up to the big ones will not only benefit your finances but also your self confidence. Start with the Macy’s credit card. Say there is a debt of $200 on shoes you probably shouldn’t have bought. That can be paid off after one paycheck. Not only will you knock out a payment and minor debt, but you’ll feel the sense of accomplishment that comes with being in debt to one less person.
Don’t get discouraged: This is going to be a long journey. There’s no telling how long it will take to pay off all your debt, as it’s different for every person. The biggest favor you can do is to stay positive and keep reminding yourself that this is beneficial. You are doing this to better yourself for your future. The faster you pay it off now, the less you have to worry about it once you’re out of school. Stay focused and don’t give up.
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