SPOKANE, Wash. — Millions of people could soon be free from student loan debt, so how can you make your money work for you?
With President Biden’s loan forgiveness plan, 1/3 of borrowers will see their debts gone for good, according to The Federal Reserve. The average student loan payment is $393 dollars a month. If you won’t have to make this payment anymore, Kumiko Love — The Budget Mom — has tips you can use to make the most of your money.
She’s been getting a lot of messages on Instagram since Biden’s announcement. She says thousands have reached out to her asking for help on making the most of the money saved from student loan forgiveness.
Love says if you have less debt or none at all, it’s time to put your money to work in three simple steps.
STEP ONE — Make sure you start or add to your emergency fund.
“This is a perfect time to start or implement your emergency savings,” she said. “If you haven’t started, I recommend three to six months of emergency reserves.”
This is money you can use for unexpected and unplanned expenses and money you won’t touch otherwise.
STEP TWO — Pay off high interest debt.
“This is the opportunity for us to pay off the debt that is costing us the most which is usually high interest credit cards or personal loans,” Love added.
Since loan payments are still frozen, pay as much as you can now on personal loans or car payments and don’t use the relief to be reckless.
“We kind of see it as free money, splurge money right, but I always encourage people to look for the opportunity,” she said.
STEP THREE — Invest in your retirement.
“Right now, a lot of people think investing is very scary,” she added. “We’ve seen kind of this turmoil and these downturns in the market, but really what I teach and I preach with investing is the long-term mindset.”
Make sure you’re investing in a 401k or Roth IRA. The longer your money sits, the more you’ll have when you retire.
“Now I can literally see the finish line,” said Nick Modas. He’s a current grad student with undergrad loans who qualifies for forgiveness.
He’ll have $20,000 of his debt eliminated, and he’s already thinking about putting more money in his investments.
“I would definitely increase the percentage I contribute in both of those, so I could retire with a nice cushion and not have to really worry about life,” he said.
Life will look a lot different for millions of people whose loans are now forgiven.
“My chest got a little bit lighter,” he said.
Your future will be brighter if you take steps now to put your money to work.
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