So you managed to take advantage of today’s low rates and refinance your student loan. Now, you have lower monthly payments, and have some to spare for other important expenses. If you want to leverage your benefits, setting up a master plan for your new student refi savings could help you take advantage of said savings for the long term.
Here are some practical steps you can take to benefit from your student loan refi savings:
Know how much goes to what. Structuring your budget and being aware of the flow of your finances helps you control your spending. Still, sticking to it requires much personal dedication. Evaluate yourself and divide your priorities, separate needs from wants, and set up auto pays if you can. This helps lessen the anxiety of missing your student loan payments.
Great! Your student loan refi gave you a breather. Now you can redirect your focus to more pressing financial matters – like paying off some debts, for example, or saving for a home.
It starts with one question: “What’s important to me right now?”
Are you planning to start saving for retirement early? Finally move in with your long-time boyfriend and maybe start a family? True, your refi savings may not seem much but when you consider the savings you take from a lower interest rate throughout the entire loan term, you will realize that it could sum up to thousands of dollars.
Channeling that money into your investment portfolio, for instance, or your savings puts that money in a place with greater returns in the future.
Don’t get sidetracked
It’s easy to splurge when you have the means to do so. But that would only satisfy your short term desires and could even lead you into deeper debt when left unchecked.
Stick to the plan. It’s no crime to treat yourself every now and then, but excessive spending just because you can can seriously impair your finances sooner than later.
A little discipline will go a long way in helping you attain financial freedom early in life. It also lessens the anxiety that comes with having no back-up fund should something in your life go haywire.
Take care of debts
Your revolving credit accounts incur high interest so if you don’t pay your balances in full every month, you could end up paying more. You can use money from your refi savings to pay up your balances. It is not necessary to eliminate your cards, just take steps in handling and using them wisely. Credit cards help you build your credit if you don’t spend to the limit and don’t miss payments.
Another option to taking care of debts is to consolidate them via getting a personal loan. Debt consolidation allows you to combine your debts into one, making it easy to track payments when they’re due.
What’s more – personal loans have lower interest rates than credit cards. It’s a smart investment move if you’re fed up with carrying too many debts. If you’re going to keep some cards – and it is recommended – keep your longest ones as they help establish credit history. Also only keep those with credit limits just enough to let you make your necessary purchases without recording an overspending. These are damaging to your credit record.
Save for a mortgage down payment
Conventional mortgages today require around 10 to 20 percent of the home’s purchase price as down payment. If you are thinking of pursuing your American dream and finally living in a home you can call your own, saving for the needed down payment as early as now can help you realize that dream one step at a time.
Of course, conventional loans are not your only mortgage options. There are also existing mortgage programs that only require 3.5 percent down payment, such as the FHA loan. Research for programs viable for you and plan for qualifying as early as now.
Save for retirement
Save while you have more time. Thanks to the power of compounding, your wealth can build year after year. If you start contributing to your retirement funds while you’re in your 20s, your money could seriously grow and add up over time. Who knows, you could be retiring early.