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Our generation lives in a world where debt is inevitable. From an early age we’re taught that the only way to make it in this world is to go to college which, unfortunately, means taking out massive amounts of student loans. It seems like everyone my age seems to be dealing with this right now. My mission is to have these loans paid off by the time I’m 30 which means lots of planning and budgeting for the foreseeable future. I’m going to share with you how I paid $16,800 on my loans in just one year!
There are two key factors to creating a budget that works for you: income & expenses. A lot of people don’t stick to budgets simply because they’re confusing or they didn’t create one that was feasible for their situation. This method will make it easy for anyone to stick to!
First, you’ll need to figure out your monthly income. This needs to be your take-home income, after taxes and other deductions. In this example, my income would be $3,500 a month.
Second, you need to add up all your monthly bills. Your rent, electric, cable and even the smaller things like your Netflix or Xbox Live. These are reoccurring items that you KNOW are going to happen every month and you need to take that out of your monthly budget. For me, these add up to about $1,500. For the sake of this exercise I’m leaving out my loan payments. You’ll find out why later.
So my income of $3,500 less expenses of $1,500 leaves me with a monthly budget of $2,000.
I’ve taken a look over my bank statements the last month and estimate that I spend about $500 on groceries, gas and lunches during my work week. These are things that would be hard to reduce more than they already are. So I’ve set my personal budget at $600 each month to give myself a little wiggle room! If you’re going to do this you need to understand that extra spending has got to be minimal in order for this to work. No shopping sprees, no extra Starbucks, you get the point.
OK now here’s the exciting part! I’ve gone from a monthly budget of $2,000 to my own personal goal of $600 a month. That gives me $1,400 a month to spend on my loans! Or $16,800 a year! How amazing is that!
Now, that part is super cool but this second part is a pretty big deal. You actually have to stick to the monthly budget you set for yourself! Sticking to a $600 a month budget can be pretty tough! I use an app called Daily Budget to keep on track! I just type in that $600 a month as my income and it’ll break it down to a daily budget for you. This way you can see how your daily spending will affect the bigger picture. Click here to download the app! It’s free!