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Budget Therapy

‘Retail Therapy’ is deemed as the act of shopping for the primary purpose of improving one’s mood. If you go on to research the psychology behind the not-so-recent trend, you’ll need a plethora of experts who claim there’s actually some truth to it all.

It’s quite normal for tension to arise from our everyday lives, even more so that you might seek the easement of such tension. All’s well in moderation, right? But consider, for a moment, the motivation behind the seemingly harmless act of retail therapy. As you shop, you’re naturally visualizing how you’ll use the products. In doing so, you are actually visualizing your new life. Kit Yarrow, a professor of psychology and marketing at Golden Gate University in San Francisco suggests, “The purchases themselves are only part of the allure. Shopping – and visualizing – is preparation and it makes people feel more control and less anxious about [these tensions].”

There it is – visualization – the driving force behind retail therapy and nearly all other forms of self-solace. But what if there was a different approach you could take to achieve the same fulfillment without sabotaging your long-term financial stability? What if you chose budget therapy over materialistic mindlessness?

You’re smart. You didn’t get to where you are without hard-work, determination, and some good ol’ fashioned, all natural intelligence. Unfortunately, if you’re like most recent grads, you’re struggling under the weight of student loan debt and wondering how in the world you’re supposed to start saving. It’s easy to feel out of control and financially trapped, but learning how to budget your money properly is a guaranteed to deliver the same remedy as retail therapy without being quite as costly (or as fleeting).

Here are some great budgeting tips to keep in mind.

Budget Planning

Rob Berger, a Forbes Contributor and an expert budget planner, claims “the goal of a budget is to help us control our spending so that we can spend less than we make and focus our spending on what matters most to us. However, you choose to budget, it should meet this goal. If it doesn’t, you’re doing it wrong.”

Understand your goal and create a budget for how to get there most effectively. *Needs to be linked to the Financial Goals blog once live While it’s imperative to choose something to save for (i.e. paying off your student loans, retirement, etc.), try to enjoy the process instead of obsessing over the outcome. Make the goal be the budget itself and need encouragement in keeping to your budget every month. And remember, it’s more important to be consistent with your budget planning than it is to be perfect.

Budget Planning is Forward Thinking

When creating a budget with maximum effectiveness, it’s important to apply it to the future. As you prepare for next month, give every dollar a name. When you do this, you’re telling your income where to go instead of scratching your head at the end of the month, wondering where it all went. Keep in mind seasonal necessities like paying extra for your electric bill to keep your house cool in the summer. Don’t forget about holiday gifts in December. Planning to get a nice tax return this year? Make sure that extra income is accounted for. If you don’t have a plan for it, it’s likely to slip out the back door when you’re not paying attention.

Flexible Budget Planning

Apply the familiar experience of shopping at the mall to budget planning. You walk through the endless aisles of products, perusing your options for the perfect fitting you-name-it. As you’re visualize your ideal (Financial) self, you may buy a pair of boots you simply must have to survive the winter. But it’s not like you’re going never going to buy another pair of shoes again. As life changes, your wardrobe (and your budget) will change with it.

Track & Save

If destructive habits like retail therapy arise out of a need to feel more in control, what could be more empowering than coupling that same drive with a healthy dose of self-control? Tracking every dime you spend for a month will be extremely eye-opening and reveals your sometimes hidden spending patterns. It also shows how spending even small amounts of money here and there adds up over time. As you observe these patterns, you’re able to choose what’s most important to your budget and eliminate frivolous expenses.

If the goal of budgeting is to spend less than you make, one of the best ways to do that is to save first. Instead of saving whatever is left over at the end of the month, set savings aside first and spend the rest. By getting money out of your pocket and into a savings account, you’re less likely to spend your savings over the course of the month.

Try Window Shopping

If you simply cannot resist the urge for retail therapy, try window shopping as an exercise of willpower. It’s possible you’re just looking for a way to pass the time and, in order to feel like you’ve accomplished something, think that you need to walk away with a product in your hand. Try the dress on for size. See how good you’ll look in it. Then put it back on the rack and return to the store next week if you truly must have it.

This sort of practice still gives you the entertainment you seek while shopping, but it also helps you avoid impulsivity – one of the most devastatingly maddening habits for your budget. Impulsivity is rarely your friend, especially if you’re hoping to have a healthy relationship with your money. And let’s be honest… you are. Have you ever considered those impulsive, extraneous purchases are actually compounding your stress rather than alleviating it? Think about all your hard-earned dollars and how many hours it took you to be able to afford that $150 purse. Oh, how quickly it all vanishes with a single swipe of the credit card!

Budget Planning IS Freedom

Finally, the most important budgeting tip is to make sure you properly understand the nature of a budget. A lot of people have misconceptions about budget planning and feel that a budget will limit their ability to do what they want, when, in fact, the opposite is true. Budget planning IS freedom. Mindless spending is far more limiting than proper budget planning, and you’ll likely play an anxious game of catch up rather than calmly putting one foot in front of the other as you proceed through the year. When you learn how to budget your money properly, you’re the master of your money and are able to adjust it accordingly. Remember, there’s no perfect budget out there. It takes practice, and you are ultimately the only one who gets to decide what works best to help you achieve your financial dreams.

How to Pay Off Student Loans Faster

When you took out student loans for your degree, you likely envisioned a bright future full of exotic career options. And why wouldn’t you? You’d never go through all that trouble and years of hard work if you didn’t have big plans for your career. But now that you’ve started making monthly payments on those not-so-shiny student loans, you and yourself in a deserted breakroom screaming “Wiiiilson!” at the top of your lungs to an endless sea of ‘tick-tocks’ coming from the clock on the wall.


But before you do anything drastic, take a deep breath and remember – you’re not nearly as alone as you might feel. In fact, millions of recent grads are in the exact same situation, and each of you has the exact same question on your mind. “How can I pay off my student loans faster?”


If the thought alone of being debt-free is not enough to motivate you to pay off your student loans faster, consider what you could do with all that freed up money. You could finally afford that trip to Europe. How about a nicer car, you know, one that you actually enjoy driving? Whatever it is, life without debt opens up a world of financial possibilities, and there are a couple of (smart) ways to go about speeding up the process.


How Much Do You Really Owe?

It may seem obvious, but if you’re trying to pay off your student loans faster, the first thing you want to do is to take stock of your debt – not just your student loan debt, but any other loans you may have taken out during school (credit card, auto loans, mortgage, etc.). You need to have a clear understanding of how much you owe various lenders, and more importantly, the interest rates associated with each loan.


While it’s almost always in your best interest to pay off your student loans faster, there is one exception that may surprise you. For example, credit card lenders often charge much higher interest rates than student loan lenders. If you’re in a situation where you hold a large amount of credit card debt, it might be more beneficial to utilize the lower interest rates on your student loan debt. Instead, work towards paying off that credit card debt for the sole purpose of minimizing the amount of your hard-earned cash that is going towards interest.


Pay Off Your Student Loan Debt Faster by Refinancing

That being said, have you looked into refinancing your student loans? A whopping 62% of borrowers have yet to refinance their student loans, which is mind-boggling considering you can consolidate and reduce your monthly payments. ELFI customers on average have reported a savings of $309* a month and should see an average of $20,936 in total savings after refinancing their student loans with ELFI*! Student loan interest rates are currently dipping into historic lows. The sooner you refinance and pay off your student loans, the more money you can save.


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Make More Than the Minimum Payment

As you look into refinancing your student loan debt for lower interest rates, find a monthly payment that works with your budget. As you fine-tune your budget planning method, pay more than your minimum monthly payments whenever possible.
It’s imperative that you instruct your lender to apply any additional payments directly to your principal, as many lenders have found clever ways to maximize their profits by putting those extra funds towards your future interest.


Pay Off Student Loan Debt Faster by Applying Your Raises

As tempting as it may be to treat yourself with any raises, bonuses, or tax returns you are rewarded over the next several years, visualize a life entirely free of student loan debt! Any time you skip out on an opportunity to take a big chunk out of your principal, you’re essentially lengthening your debt sentence. Even if you don’t apply the entirety of your bonus income directly to your student loan debt, at least think twice before investing in a new big screen TV. Oh, by the way, that’s not an investment.


Avoid Income-Driven Repayment Programs

Most income-driven repayment programs offer lower monthly payments, which is great! Except they come at the expense of lengthening your repayment term. If you’re trying to pay off your student loans faster, it’s best to avoid income-driven repayment programs and explore other options like refinancing your student loans (which can also reduce your monthly payments without unnecessarily dragging on your repayment term for several more years).

There are plenty of articles out there about paying off your student loans, advising you to take a federal job that offers a loan forgiveness program. While it’s not the worst idea, you just spent 4+ years working towards a degree. Do you really want to spend another 5 years in a job you’re not thrilled about just so you can eliminate your student loan debt? Would it not be more fulfilling to get a job that can most fully prepare you for a long- term, purposeful career without sacrificing your current sanity?


Refinancing – The Smartest Way to Pay Off Your Student Loans Faster

The fact is – you’re no stranger to making sacrifices for your dreams. And while it may seem like you’re barely getting traction, you’re well on your way to the future you envisioned years ago. Obviously, there’s not a quick ’n’ easy way about it, but there IS a smarter way – by making sure you know your options. Regardless of how you choose to go about it, the smartest way to pay off your student loans faster is, without a doubt, to refinance for a lower rate.


What Could You Be Saving If You Refinance


*Average savings calculations are based on information provided by SouthEast Bank/ Education Loan Finance customers who refinanced their student loans between 8/16/2016 and 10/25/2018. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors.

What Do You Mean I’m Not Qualified

Every year, hundreds of thousands of students take out federal student loans without truly understanding the details of this 20-year debt sentence. But that’s not so surprising because there’s a lot to know, and it can be quite confusing.

A common mistake is to assume that if you serve in the public sector for ten years, you automatically qualify for a Student Loan Forgiveness Program (SLFP). Unfortunately, it’s much more complicated than that, and the information found on government websites is about as confusing as using Sudoku to help you navigate the Oregon Trail.

Barbara Thomas, Executive Vice President of Southeast Bank, explains, “There are a number of qualifications for this particular program that a lot of students who attempt to enter the program don’t understand. Unfortunately, because there are ALSO a number of student loan programs that the federal government has sponsored and rolled out over the years, as well as [several] different types of income-repayment programs, it gets very confusing at times.”

There are four qualifying factors that determine whether someone is eligible to enter the Student Loan Forgiveness Program.

1) You MUST have a federal loan that was taken out through the Direct Loan Program

2) You MUST go on a qualified income-based repayment program

3) You MUST work for a qualifying employer

4) You MUST make 120 consecutive monthly payments in-full and on-time

Let’s be clear. You have to meet all four of these terms in order to qualify.

While the Student Loan Repayment Program was rolled out in 2007, this is somewhat of a newer issue, at least in the public eye. 2017 marked the first batch of expectant student debtors who reached the finish line of their ten-year sentence to discover they’d somehow fallen short of one of the qualifications. Often, it’s as simple as a missed payment. Even more despairingly, others found out that the employer whom they believed to be qualified for the program was, in fact, not eligible.

Sadly, only 500,000 borrowers qualified for forgiveness last year. Not surprisingly, the government doesn’t know how many were not qualified, claiming it’s entirely up to the borrower to verify their eligibility.

If this is you, Thomas explains, “The best thing you can do is to know your options.”

The most important option that so often goes overlooked is the opportunity for refinancing your student loans. Two-thirds of borrowers have yet to refinance their student loans, which is hard to believe considering this option could save you an average of $282 per month and more than $20,000 over the life of your loan (assuming they’re financed with a reputable lender).

Refinancing student loan debt is becoming more and more appealing as students learn the federal loan program is ‘one size fits all’, meaning regardless of your credit history, you’re given the same exact interest rate, which is sort of crazy because that is simply not how consumer lending works.

It’s important to note that refinancing your student loans will automatically negate your eligibility for the Student Loan Forgiveness Program, which isn’t the worst thing considering you can now go out and get that job you WERE waiting on debt row for ten years to get.

While the fear of losing the possibility of forgiveness may cause some of you to fret, refinancing may be the long-awaited remedy to a frustratingly difficult situation. Furthermore, refinancing can significantly reduce the length of your loan, and consolidation completely removes the hassle of making payments on multiple loans every month. Perhaps most appealing is the ability to shop for an interest rate and loan term that most appropriately works with your budget.

Suddenly, your disqualification of the loan forgiveness program isn’t quite so regretful. It may even be a blessing in disguise. Original Article written by Casey Wheeless at WVLT. The full interview can be found here.