Making extra — or extra large — monthly payments is key to repaying your student loans ahead of schedule. But coming up with that extra cash is a challenge. Thankfully, you can carve out more room in your budget by learning how to avoid wasting money.
Budgeting is a powerful financial tool, yet it begs the question: How much help would it really be in paying off your loan?
How to avoid wasting money and repay student loans: our sample scenario
As a thought experiment, we ran the numbers on some potential savings in five different categories to see what that extra money would mean for a typical $30,000 student-loan debt tagged at 7.00% interest.
Note that the sample savings below are only anecdotal, based on examples from our Student Loan Hero blog — they might give you a rough idea, but your own savings could be greater or smaller, depending on the situation.
1. Prepared meals
You might think there’s not enough time in the day to work your day job, worry about your loans and still prepare a brown bag for lunch and a hot meal for dinner.
But every trip to (or order from) the deli, cafe or restaurant starts adding up. Delivery costs nearly five times the price of cooking at home, and even meal-kit companies are about three times more expensive than doing your own grocery shopping and preparation, according to the home-cooking website Wellio.
Instead of eating into your budget, you might try meal planning on the weekend to fill your fridge for the rest of the week.
Whether your guilty pleasure is pressing “request pickup” for Uber or Lyft ride-shares — or jumping in your car when you could take your bicycle instead — a lot of money can be saved on your commute to and from work. Carpooling and becoming a one-auto family, for example, could save you about $8,849 — the cost to operate and own a vehicle, according to AAA.
Even if you work remotely, consider your methods of transportation and how much you could save using cheaper alternatives, such as the bus or train.
Or, if you’re not ready to make a major change to your daily routine, consider that you could save three figures the next time you take a one-off trip for fun. By using strategies, such as booking your flight at the right time and not checking bags, you could save north of $600.
- Sample savings: $619 on your next vacation
- Loan payoff: Making a lump-sum payment of $619 could shave three months off your loan term
With so much money going to your lender every month, you might be tempted to treat yourself occasionally. Whether you prefer online shopping or heading to the mall, however, there are ways to cut down on wasteful spending.
You might try putting every purchase through our five-question “stress test,” for example. Or you could take a break altogether from consumerism and try a shopping ban:
- Sample savings: $600 per month with a shopping ban
- Loan payoff: Submitting $600 in extra payments per month — or $7,200 for the year — could take seven years off your loan term and save you $8,554 in interest
Be watchful for wasteful spending that is more passive in nature. Think about all the recurring charges that appear on your credit card statement, for example.
Maybe you have a gym membership you’re not using or a cable subscription you could replace with a cheaper alternative. Whatever the case, taking a line-by-line approach to your budget could save more than you might think. Start with the entertainment category, for example, where cord-cutting could save you a Benjamin each month:
- Sample savings: About $103 per month by canceling cable
- Loan payoff: Throwing another $103 per month — or $1,236 for the year — could get you out debt almost three years faster and without forking over $3,738 of interest
You might be wondering how the roof over your head could be called waste. The differences between living below, at or beyond your means, however, could dramatically affect your loan repayment schedule.
If you’re past the point of moving back home to live rent-free with Mom and Dad, consider the options at your disposal. To start, ask yourself whether you’re spending the right amount for rent.
Short of picking up and moving to a cheaper place, you might give your landlord a call:
- Sample savings: $1,800 per year by negotiating rent
- Loan payoff: Redirecting your savings — it comes out to $150 per month — to your lender would save you $4,746 in interest
Learn how to avoid wasting money by calculating your repayment savings
Even if you’re skeptical about how much waste you could find in your budget, you might be intrigued by how the potential savings can be parlayed into a shorter student loan repayment.
Of course, the figures above don’t apply to your specific situation. To see how much you could benefit from identifying and cutting waste, input your loan amount and interest rate into these easy-to-use calculators:
Once you’ve trimmed the waste — and, hopefully, reaped the rewards — you can focus on being wiser with your spending. That should lead to an even cheaper and shorter student loan repayment.
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