With many Americans saddled with seemingly insurmountable amounts of debt – stemming particularly from student loans – homeownership can seem like an unattainable goal. But the truth is that owning a home is within reach for most, assuming they get their overall financial health into shape.
While tackling student loan debt may seem the most important thing to do to get yourself on track financially, there are other measures of security that may be more important in the short term. Before you lose hope over high student loan debt, consider these tips:
Build up an emergency fund
Holding cash reserves is one of the most important things you can do to support your overall financial health. In the event of a medical or family emergency, having savings will keep you from going further into debt. If nothing happens, you can use the funds toward a down payment on a home or to pay off a larger portion of your student loans.
Schedule a payment plan
Don’t just focus on paying the monthly minimums when it comes to student loan debt. Think about it like a mortgage and give yourself a term to pay it off fully. From there, calculate how much you’ll need to pay every month – taking into account interest rates – to achieve your goal. With a set schedule, you can more easily build up your savings and keep other debt in check.
Focus on variable rate debt first
While variable rate student loans offer lower initial interest rates, these rates can go up over time according to the market. Historically, rates are more likely to go up than down, so focusing on paying off these loans will get you out of debt faster.
Pay off credit card debt first
Student loan debt often carries lower interest rates than credit card debt, making it less harmful to carry for longer periods of time. Furthermore, lenders typically understand that many people have high amounts of student loan debt, so this isn’t as big a black mark on your credit as maxed out credit cards.
Save for retirement
We know, it might seem crazy to be saving for retirement right out of college, but the truth is that it is better to get a jump on saving before you have major financial obligations, like a home loan or a family. If you are able to set up a matching retirement savings plan through your employer, getting the process rolling early will mean that it’ll be less noticeable when money is automatically withdrawn from your account.