If someone asked you why you’re marrying your fiance, you’d likely list off a bunch of personality characteristics you appreciate about them. Most of us get married because we love our partners and enjoy spending time with them–as we should. But, marriage is not only about making an emotional commitment; it also involves the financial commitment and partnership that comes with merging some or all of your assets. This is sometimes referred to as ‘the business of marriage’, and it is overlooked by many a lovestruck couple.
Unfortunately, financial stressors and disagreements are some of the top culprits behind divorce (Institute for Divorce Financial Analysts, 2022) as well as relationship conflict. Financial stress is directly tied to relationship stress. For this reason, it’s a great idea to get and keep your finances in check, as having a financially successful relationship can make a huge difference in relationship wellbeing overall. However, this isn’t as easy for the millennial generation as it was for their parents, who could work their way through college and buy a house after getting their first job. The average millennial, however, has almost $40,000 in student debt (Tan, 2022), which can prevent them from buying homes, saving for the future, and feeling financially secure.
Student debt, therefore, is one of the most prevalent financial issues (and relationship stressors) of our time. In this article, we’d like to explore some strategies for paying off student debt so that you can reduce or prevent finance-related relationship conflict and thrive financially as a couple.
Don’t delay–pay more than your monthly payment whenever you can
We all know that our loans accrue more and more interest with every passing day, yet for many of us, our instinct is to secure the lowest monthly payment possible, defer payment whenever we can, and stick with those loans for a long time. This is the financial equivalent of slowly and painfully peeling a band-aid off rather than ripping it off quickly and getting it over with.
To illustrate exactly how much pain you can save yourself by making bigger monthly payments, imagine the following: You owe $10,000. Your interest rate is 4.5% (this is even a little bit less than the average of 5.8% (Hanson, 2022)). You decide to pay an extra $100 every month. You are on a 10-year repayment plan, and this extra sacrifice means you cut your repayment period in half and finish after 5 years (Lane, 2022).
If you do decide to go this route, make sure you tell your loan servicer that you would like each extra payment to be applied to that particular month’s payment, not to the following month. If they just keep applying extra funds to the following month’s payment, it won’t help you pay your loans faster, it will just push back your due dates (Lane, 2022).
If this isn’t financially feasible for you, don’t despair. There are plenty of other ways you can pay off student loan debt with minimal stress without making extra payments.
Set up a student loan repayment fund
This is another similar option that will allow you to gradually save a little bit extra for your loans in a way that is controllable and reversible. Set up a savings account specifically earmarked for student loan repayment, and if possible, set up automatic transfers of a feasible amount every month. The reason we recommend automatic transfers is because it will keep you from accidentally spending all of your discretionary income on non-essential items (like super cute shoes you’ll never wear, or multiple meals at that overpriced ramen place) when some of it could be going towards student loans (Bareham, 2021).
However, the point here isn’t to deprive yourself or eliminate all non-necessary purchases. In deciding what amount to automatically transfer every month, consider that it should be an amount small enough that you won’t end up neglecting the account or canceling the transfers frequently, but don’t be unnecessarily stingy, either. Then you can make periodic withdrawals from that account that will go towards extra payments on student loans. Of course, the money is also there in your savings account if you need it for something else last-minute.
Note that it is alright to pause the transfers during time periods when you’re a little bit more strapped for cash. Try not to pause too frequently, but do be kind to yourself and do so when you have a month (or a few) in which you’re really in need of those extra resources.
Budget, baby, budget
This advice is so simple and commonplace that it’s very easy to let it fall by the wayside. It’s very, very common for well-intentioned young professionals to end up delaying student loan payments for a completely avoidable reason: Failure to budget properly.
Proper budgeting means understanding and anticipating your monthly cash flow, and being conservative when you estimate how much you’ll be able to save and/or put towards discretionary spending every month.
To really carefully plan your budget, try this: Every day for three months, write down or otherwise track every. single. expense. Yes, this does take a long time. However, spending often varies month-to-month. Maybe one month you need an expensive dental filling, whereas another month you don’t have many expenses. Tracking your spending meticulously for three months will help you to get a better idea of your average spending.
At the same time, you should be tracking your monthly income during those same three months. This is especially important for freelancers, seasonal workers, and anyone else whose income varies month-to-month. When averaging your monthly income, take into account previous months during the past year as well, if you’re in the same income situation now as you were then.
Once you’ve averaged your income and spending, you can calculate how much is left over each month, on average. Then you can start to plan your budget. You might make a budget for discretionary spending and a budget for loan repayment savings. Set a monthly goal for your student loan repayment budget (Bareham, 2021) and give yourself a small reward each time you stick to it. Just make sure you leave some extra padding for unexpected expenses.
If you think you might have a hard time sticking to savings goals on your own, check out savings-management and budgeting apps like digit or Qapital that can help you set and stick to savings goals and rules (Lane, 2022). Even if budgeting only results in modest monthly savings which can be allocated to student loans, that’s alright. The main point of budgeting is to become aware of what kind of financial resources are available to you versus how much you’re spending, so that you don’t end up delaying payments more often than necessary. Through budgeting, you may even find that if you’re on a longer payment plan, you have the financial resources necessary to switch to a shorter-term payment plan and be debt-free many years sooner than planned.
Make use of ‘found’ money
Maybe you get a raise. Maybe you refinance your loans and save money by doing so. Maybe you get an unexpected holiday bonus. Whatever it is, consider allocating at least a portion of any extras to paying down your student debt. For example, you might use this breakdown:
-50% of any extra money goes towards debt
-30% goes to savings
-20% goes to discretionary spending (Lane, 2022)
Adopting this method every time you end up with a little bit of unexpected cash can make a significant difference over time.
Do you have a spare room? Rent it out. A niche area of expertise, like reading tarot cards, doing reiki, teaching English as a second language, or editing? Start a freelance consulting venture in your spare time. Got a collection of nice clothing, old Pokemon cards, or other items that are gathering dust? Sell ‘em (Lane, 2022).
Of course, it’s also important to maintain a work/life balance. If a side hustle leaves you feeling drained and like you don’t have enough time to yourself or with your friends and family, it’s not worth it.
Save on wedding expenses…and your prenup!
Weddings are crazy expensive, and more savings going towards your wedding budget = less going towards becoming debt-free. We know, we know, spending money paying off your student loans is not nearly as exciting as spending more on your wedding, but paying off loans is an investment in your marriage because it will help you to avoid a lot of potential conflict and tension that can come up around money when finances are tight. We’re not saying you should get married at the town hall, but we are saying that your wedding budget should be within your means. Otherwise, you’re going to cause yourselves a lot of financial stress that you’ll have to deal with later on and will take a toll on your relationship.
Prenups are for many couples one of the most significant wedding-related expenses. The average prenup costs around $2,500–and that’s a liberal estimate. Many are far more expensive. However, with HelloPrenup you can save at least $1,900 on your prenup. HelloPrenup is the premier platform for creating prenuptial agreements online, where you can create a prenup with your partner from the comfort of your own home check out how it works.
Julia Rodgers is HelloPrenup’s CEO and Co-Founder. She is a Massachusetts family law attorney and true believer in the value of prenuptial agreements. HelloPrenup was created with the goal of automating the prenup process, making it more collaborative, time efficient and cost effective. Julia believes that a healthy marriage is one in which couples can openly communicate about finances and life goals. You can read more about us here Questions? Reach out to Julia directly at [email protected].