Creative Ways Millennials Can Save Money and Pay Off Student LoansJuly 20, 2020
With an average student debt amount of about $33,000 per borrower, paying off student loans is no small task. From small, daily changes to major budgeting moves, here are a few options for saving money and increasing your take-home pay:
Track Your Spending and Build a Budget
Building a budget is one of the most effective ways to make progress on your student loans. If you know your saving strengths and weaknesses, you can begin to plug spending “leaks” to optimize your earnings. If you’re not sure where to begin, here are a few pointers:
- Calculate your household take-home pay by finding the average dollar amount you earn each month after taxes.
- Determine your necessary expenses. These include critical costs like rent, groceries, gas, cell phone, internet and student loans.
- Calculate your total monthly spend on optional items, like entertainment and restaurant dining. Be honest when determining these totals, as understanding your spending habits is an essential step in building a working budget.
Once you’ve totaled your income, necessity spending and non-necessity spending, subtract the necessity total from your income total. This number is what’s left in your budget after mandatory expenses are accounted for.
The remaining total is yours to budget based on your financial goals. If you want to make an extra student loan payment or save for an emergency fund, be sure to factor in these types of expenses before calculating your budget for “fun” spending.
Live With a Roommate
Millennials are already setting new trends when it comes to living situations. Based on housing prices, more than 12% of millennials report they’re planning to be forever-renters rather than buying a home. Along with cost, flexibility and maintenance perks, renting also enables millennials to save by living with roommates.
Even if you plan to live alone or buy a home someday, roommates are a great temporary option for saving on rent and utilities. Some roommates opt to split bills for other shared expenses, as well, by buying groceries together or sharing entertainment costs. However you choose to divide and conquer, this can be a great financial choice, increasing your take-home pay by hundreds of dollars each month and freeing up more of your budget for student loan payments.
Eat (and Drink Coffee!) at Home
We get it. Cutting the avocado toast and gourmet coffee isn’t going to make you rich. That said, millennials do spend a greater percentage of their food budgets on restaurant and fast food dining than any previous generation, so if you’re eating out several times each week, cooking and packing meals is an effective way to save a few dollars.
In his book, “The Latte Factor: 7 Key Lessons We Can Learn From a Cup of Coffee,” author David Bach explains the idea that making small saves over time can add up to a significant total. Again, the point isn’t achieving wealth by cutting out coffee runs. The central concept of the Latte Factor is that making small saves each day creates a habit of saving and increases your total take-home pay.
But is eating at home really less expensive than eating out? It’s easy to make the case that, if you’re eating fast food or opting for appetizers, the cost of eating out is comparable to packing lunches. In truth, the average restaurant markup on food is about 300%, meaning you’re paying almost three times what it would’ve cost to enjoy the same sandwich or fries at home.
An additional bonus of home-cooked meals is the nutritional value. For the same price, or often less, than it would cost to eat at a restaurant, you can enjoy a fresh, balanced meal at home. If you’re eating on a budget, opting for at-home meals increases the available food options within your price range so you can cook more of your favorites for less of the cost.
For a few more pointers on food savings, check out our blog on budgeting tips for dining in.
Check up on Your Monthly Subscriptions
There’s a reason companies love the subscription model. They know that, whether you’re using their services or not, you’ll likely forget to cancel your account. This means you may be spending dozens if not hundreds every month on automatic payments to Netflix, Spotify, Amazon and many other subscription-based organizations.
Take stock of your monthly subscriptions and opt out of the ones you no longer use. Monitoring these payments is an easy way to save a few extra dollars each month for your student loans.
Consider Refinancing Your Student Loans
Refinancing student loans means consolidating many different student loans into one, lower-interest loan. If you have several high-interest student loans, refinancing your student loans can be a great way to earn a better interest rate and lower your monthly payment. To learn more about how refinancing could improve your payment, try ELFI’s Student Loan Refinance Calculator to see estimates for your loan over different term lengths.*
ELFI also offers several benefits to reward smart savings and spending. For example, with free prepayment, you won’t be penalized if you want to pay off your loans early or if you opt to pay more than the required monthly total. This is an excellent perk for millennials who are saving to pay off their student loans as quickly as possible.
From packing lunches to canceling unused subscriptions, millennials are finding creative ways to pay off student loans more quickly. Keep an eye on our blog for more great loan tips and tricks, and in the meantime, we’re rooting for you as you continue to save and spend wisely!
*Subject to credit approval. Terms and conditions apply.
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