I hear the same things over and over again when talking to borrowers.
I had one borrower who said to me that they have an “expensive lifestyle” and can’t afford their loans. I had another that said after all their bills were paid they only had $200.00 left and couldn’t afford $300.00. The others that said it just doesn’t fit in the budget is countless.
What they all have in common is the budget. What often times hurts a budget? Believe it or not your debit or credit card.
Cash hurts more than plastic. Research has shown that you spend more whenever you are using credit than cash because of the emotional response of cash that is elicited in your brain.
The best way I’ve found to do this is using the envelope system created by Dave Ramsey. This is something I started about 3 years ago and the results are absolutely amazing.
So how do the envelopes work?
It’s simpler than you may think.
Dave Ramsey recommends you divide the money up by pays, though I do mine monthly. Either way here is the basics.
You decide how much you spend in a certain category. Not all categories (such as gas) use this but popular ones are doctors, repairs, entertainments, gifts, and groceries.
So let’s take groceries as an example. Let’s say you spend $400.00 in groceries and between you and your spouse get paid weekly. So every week you write a check for $100.00 and put it in your grocery envelope. Then you use this money for groceries and groceries only. You cannot use it for anything else! Once the money is gone you cannot use any other money. This keeps you on budget and from overspending.
My favorite thing though in the creating of funds that build up over time. Let’s say you put $100.00 towards car repairs but don’t use it all one month. Well you can move whatever is left over to the next month and let the funds build up. That way when a bigger bill does come up you already have it covered since you’ve been saving it over time!
So how does help your student loans?
It’s pretty obvious. If you only put $100.00 a month in your eating out envelope and it’s empty then you must say no to people and cannot go out. If you don’t overspend by an extra $200.00 just because it’s in your account, now you can pay your loan when you couldn’t before.
The best part is this will not only help your student loans but every party of your financial health.
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