Many articles on this website have already discussed various strategies that can be implemented to save money so that additional cash can be devoted to student loans. Most student debt borrowers already know how cutting expenses can help individuals repay their student loans early, and saving money is perhaps even more important that earning extra cash for a variety of reasons. However, if you need to spend money while repaying student loans, it is important to hold off on shelling out cash for as long as possible, so that additional money can be devoted to student loans.
There are many reasons why people should hold off on spending money for as long as possible while repaying student debt. One of the main reasons is because student loans typically have insanely high interest rates. As previously mentioned on this website, any money that does not go to student loans is essentially costing you money, since that cash can be used to lower the balance of student debt upon which interest accrues. As a result, the best strategy is to just cut an expense altogether so that this cash can be fully devoted to repaying student loans.
Of course, it is not practical to simply not spend money on a number of necessary items. However, there is still a benefit to spending money on an item at a later date rather than an earlier time. As you pay down your student loans, the effective interest rate of your student debt will go down if you make sure to pay off high-interest student loans first. As a result, the longer you wait to purchase an item, the less of a “cost” buying that item will have on your bottom line, since the interest on your student loans will presumably be more manageable over time.
During my student debt repayment saga, there were instances when I made sure to hold off on spending money so that I could devote more cash to my student loans. For instance, while repaying student debt, I really needed to buy a new pair of black shoes, since the set I had was several years old and was really beat up. Nevertheless, I wore those shoes months after I should have replaced them, and I only bought a new pair once my boss noticed that I had holes in them! However, I was able to devote the money I would use on new shoes to pay down my high-interest student loans, and by the time I purchased new shoes, interest was accruing on my debt at a lower rate.
Another time during my student debt repayment saga, I really needed to replace my bed. My beat up old bed was extremely rickety, and at one point, it would lean to the side if I rested on it in certain ways. Rather than spend hundreds of dollars to replace the bed, I bought some duct tape and “MacGyvered” a solution that made my bed reasonably comfortable for about a year. By the time I acquired a new bed, I had completely paid off my student loans, and I was happy I made sure to hold off on spending money so I could use all available funds to pay off my student debt.
It is important to be clear, however, that you should not avoid spending money if you will waste more money delaying a purchase than you would save by holding this off. This website has already discussed how being cheap can be costly, and you should not hold off on spending money if you will later have to shell out more cash than you would if you had simply spent money in the first place.
There are many examples in my life when I held off on spending money and this actually had a negative effect on my bottom line. One recent example that occurred after I paid off my student loans is instructive on this point. After I moved into my condo last year, I discovered that the air conditioning unit was not that efficient in cooling my place. I conducted the inspection on my condo in January, so I could not check the status of the AC unit that effectively, and when the summer rolled around, I had to run the AC almost constantly to keep the place cool. I decided not to repair the AC unit, since I figured that the longer I waited to spend money to fix this issue, I would enjoy present value of the money it would take to get this fixed.
However, my electric bill in the summer was about four times higher than it was for the rest of the year, including the winter, when I relied on electricity a great deal to heat my place. In addition, I am sure that running the AC unit constantly probably put an insane amount of stress on the equipment, and this might have shortened the life of the AC unit. As such, I wish I just spent the money to fix the equipment when I first had an issue, and I am definitely going to get this looked at as soon as possible when the summer rolls around.
As with all things in life, saving money while paying off student loans requires a balance. It is generally best to hold off on spending money while repaying student loans, so that you can devote all available cash toward paying off your student debt. However, sometimes holding off on spending money can actually cost you cash, and you shouldn’t be frugal to the point that it forces you to shell out more money at a future time.