You’re ready to make a plan to pay off your debt. First, you need to know what you have and where. I call this taking inventory of your debt. Next, you’ll prioritize your debt, or decide which debt you should pay off first.
Why can’t I prioritize all of my debt? I get the feeling of wanting to prioritize it all. You want to pay down all of your debt so it’s hard to pick what comes first. When we don’t prioritize, we’re more likely to feel like we’re not making progress.
Before you can make a plan to pay down debt, you’ll need to take inventory of your debt. Taking inventory means knowing what debt you have and some key details about it.
Although this step may sound simple, many of us are afraid to look or feel totally overwhelmed when thinking about it. Facing our debt and the specific details around it can feel like an incredibly intimidating task, but most often, we’ll be less stressed when we know exactly where we stand.
Over the years I’ve noticed that many people use their credit scores as a proxy for their financial health. It’s something tangible that we can see go up or down and the higher it is, the easier it is to get a new credit card, take out a mortgage, and even get a new job.
With something as nebulous as our finances, it can be really nice to have a report card. People actually ask me all the time: “if I were to have a grade in my finances, what would it be?” We want to know if we are getting an ‘A’ in our personal finances or just squeaking by.
One of the most common questions I hear is: “What should I do first with my money?” Should we pay off student loans before investing in a 401(k)? Should we pay off high interest credit card debt before building a rainy day fund?
This is a really important question. If you got a tax refund or bonus check tomorrow, would you feel confident about knowing where to allocate your money? Most of us have multiple financial goals, but contributing to all of them at once isn’t practical.
For many of us, income-based repayment is a great option for our student loans. Instead of receiving a debilitatingly high bill each month, we are charged an amount based on what we earn, typically making payments much more manageable. Then, after 20-25 years of on-time payments, our loans are forgiven. Voila!
Surprisingly, what happens next is often not discussed. Don’t kill the messenger - it’s not pretty.
One of the most common questions I get about student loans is whether or not it makes sense to refinance. Why? We’re looking for any way to lessen the burden and make it easier to pay off our student loans. Here’s everything you need to know about refinancing your student loans and how to determine if refinancing makes sense for you.
