While repaying student loans, it is easy to think that paying off student debt will cure most of your financial problems. Indeed, many student loan borrowers devote a large amount of their incomes each month to student loans, and directing these funds to other purposes can improve one’s life. However, there are many reasons why you should be financially responsible after paying off loans, and continue to live a frugal lifestyle even when you no longer have student debt.
I paid off my student loans hastily, and at the time, I did not have sufficient financial resources to comfortably pay off my student debt. For a number of reasons teased out in this article, I regret not taking more time to pay off my student loans, and you should not make the same mistakes I made.
The day I paid off my student loans, I was sitting in my office at work, thinking about how I finally wanted my student loans to be completely repaid. After some back-of-the-envelope calculations, I reasoned that I could completely pay off my student loans if I devoted almost all of my savings and emergency funds to this purpose. Without much more thought, I moved some money around, and paid off the last of my student debt.
Although it felt great to be debt-free, this situation left me in a precarious financial position and forced me to be financially responsible after paying of student loans. I did not have much emergency savings after paying off my student debt, and I was not able to build up my financial reserves for months. If I lost my job or suffered a life emergency, I would have been in serious financial trouble, since I did not have enough savings. This situation caused me much stress, and I wished that I had set more money aside rather than hastily paid off my student loans.
In addition, I worried about paying taxes after I completely repaid my student loans. During my student loan repayment saga, I usually had to pay extra income taxes during tax season because of the various side-hustles I worked. I withheld a large amount of money for taxes from the income I earned at my main job, but this was not always enough to cover the taxes I owed on income from my part-time gigs.
Although I usually saved money to pay for taxes, I used most of the money I put in reserve to repay my student loans. Fortunately, I paid off my student loans in August, and the taxes I owed didn’t need to be fully paid until tax season. I ultimately was able to save money and earn extra cash through side-hustles to satisfy my tax obligations, and I was happy that I was able to be financially responsible after paying off loans.
I also had to find and move into a new apartment shortly after paying off my student debt, which caused some financial difficulties. Moving can consume a lot of money, since you need to provide a security deposit, pay a month of rent up front, and sometimes pay a broker’s fee. In addition, movers cost a ton of money, and buying new furniture and other household items can drain financial resources.
Fortunately, I still had several months on my lease when I paid off my student loans, so I had some time to save money for these expenses. When it came time to move, I was stretched thin financially, and I did not have too much money in savings until I received my security deposit back from my old landlord. In any case, this situation made be financially responsible after paying off loans, since I had to save money for moving costs.
You should not copy my mistakes, and make sure that you have sufficient money in reserve after paying off student debt. Try not to tap into your emergency savings to pay off student loans, since this can leave you in a precarious financial situation. As mentioned in a prior article, you should typically have enough money stashed away to cover your living costs for six months or so in case for life emergencies arise, and you shouldn’t use this money to pay off student loans.
Also, you should not feel like you have conquered your student loans only after paying off the entirety of your student debt. As mentioned in prior articles, it might not make sense to completely pay off your student loans, since this could affect your credit score. In addition, if the interest rate on your debt is around three percent or less, having student loans might not cost you anything because of inflation. One of my brothers stopped stressing about student loans long ago even though he has thousands of dollars of low interest student debt left, since it does not make financial sense for him to pay off these loans. In the end, you do not need to put yourself in a financially-precarious situation in order to pay off student loans.
Furthermore, it is important to be financially responsible after paying off student debt so that you can achieve other life goals. Take it from me, once you stop living a frugal lifestyle, it s difficult to make sacrifices to achieve financial aspirations. As mentioned in prior articles, student debt could affect your ability to buy a home or save for retirement, and it is important to be financially responsible after paying off loans in order to work toward other financial goals.
All told, you should not think that all of your financial difficulties will disappear once you pay off your student loans. Indeed, you might need to be financially responsible after paying off loans so that you can work yourself out of the hole that repaying student loans can create. In addition, it is important to maintain a frugal lifestyle after paying off student debt so that you can accomplish other life goals.