In my last article, I discussed how people should not sweat the small things while living frugally to devote extra cash to student loans. However, there are some major strategies that can be employed to save money while paying down student debt.
Many readers are likely drawn to this blog in order to find out how to earn extra cash on the side so that they can use any additional funds to pay off student loans. Indeed, “side-hustle” is the most-clicked tag on this website, and it is true that I earned around $120,000 from part-time jobs over roughly three years of my student debt repayment journey. Of course, this cash helped me expedite my student loan payments and contributed to me paying off my student loans before I reached the age of 30.
However, it is important to impress now that saving money is perhaps more important when paying off student loans than earning extra cash. There is an old adage that “a dollar saved is a dollar earned,” but this is not really true. Any money you save can be devoted entirely to your student loans. However, if you earn extra cash through side-hustles, that money will be taxed at a rate that is likely higher than the wages from your primary job. I will tease out all of these topics in more detail when discussing side-hustles, but I wanted to impress now that saving money is perhaps even more important than earning extra cash when paying off student loans. Therefore, all those interested in paying down student debt should heed any advice on minimizing expenses and saving money.
One of the biggest ways anyone can save money is through reducing housing costs. Indeed, housing costs comprised half of my living expenses while I was paying off my student loans, and I am sure that many of you also pay a significant amount of your paychecks to housing as well. However, I know plenty of people in their 20s and 30s who live at home and pay almost nothing for housing.
By living with a relative rent-free, one can likely save tens of thousands of dollars a year, which can dramatically affect your student loan balance. I personally did not have this option during my student loan repayment journey, but if I had the chance to live rent-free with a relative, I estimate that I would have paid off my student loans years earlier. Of course, living at home can dramatically affect one’s social life, and this option is not for everyone. However, choosing this strategy for any length of time can make a huge impact on your student loans.
If you are not comfortable living with a relative rent-free, or you do not have this option, make sure at the very least to choose modestly-priced housing and live with a roommate or two. I personally lived with a roommate for the entire time I paid off my student loans, and having a roommate helped me lessen utility expenses as well as housing costs. I lived in a relatively nice building, but if you have the option to live in a lower-priced property with multiple roommates, do it. I have a friend who lived in a modest walk-up apartment for years, and he was able to spend almost $10,000 a year less on living expenses than me. This is a lot of money that can be devoted toward student loans, and a small change in where you live can massively impact how much money you have to pay off student loans.
Another way that you can save money is on transportation. It is true that some people need a car for their daily lives, I get it. However, if you do not absolutely need a car, I would suggest that you go without one. Owning a car is so “20th century,” and most people in urban areas can get around just fine with Uber and Lyft. Also, people who live in cities must oftentimes pay for parking on top of the other costs associated with owning a car, which can make car ownership an expensive enterprise.
My area also has ZipCar, a car-sharing service in which vehicles are parked on the street and individuals can reserve a nearby car for hours or days at a time. This option makes it easy to quickly rent a car when I absolutely need one, and I encourage everyone to research this option as well. Cars can really be “money pits,” and one can save a lot of money by not purchasing or leasing one.
Another way that you can save a massive amount of money is through your eating habits. Last week I discussed how you should avoid giving up small creature comforts that make you happy like purchased coffee, and I truly encourage everyone to spend money on smaller items that provide enjoyment. However, one can save much more than the $2 to $3 a day that a coffee habit might cost by cooking more, bringing lunch to work, and not eating out.
During my student debt repayment journey, I only spent around $10 a day on food. When I told my grandmother this, she laughed, and related how she spends less than half of this amount a day on groceries! However, even spending $10 a day on food is much less than the $20 to $25 a day I was spending by eating out for all my meals.
Spending less on food was not easy for me. I only know how to cook four meals, and I therefore had very little variety in what I ate for dinner each night! For breakfast, I usually just had a banana or something cheap, and for lunch, I usually had a $5 footlong at Subway or another similarly-priced meal. By reducing the amount of money you spend on food, you can easily save thousands of dollars a year, and you will probably be eating healthier as well.
Ultimately, there are many ways that anyone can save money in their daily lives, and not one single approach will work for everyone. However, by reducing major expenses that make the most impact on your bottom line, you can devote more money to student loans.