Statistics show that about 33% of all Americans age 25 and older have college degrees and those numbers are rising over time.  Unfortunately, many Americans use loans to finance this higher education.  Nothing welcomes your adulthood like getting the first student loan bill in the mail.  These bills can control your life if you’re careful.  And, while we don’t recommend taking loans in the first place, following these six steps will help you steer clear of trouble and manage your debt in a responsible manner:

1. Don’t Ignore Your Student Loan

Most of us would agree that student loans are no fun to pay back.  Completely ignoring them, however, will lead to serious consequences in both your credit rating and financial future. Make sure you start paying them off right after finishing college.  

Editor’s Note: College loans typically give you a six month grace period from graduation before you have to start paying them off.

2. Set Up A Budget

Your lifestyle completely changes after college.  You’ll need to start paying attention more to your financial surroundings and managing the flow of money through your accounts.  Part of managing your income and expenses will involve tackling your student loans.

Monitor all your incomes (paychecks mostly) and expenses (rent, food, utilities, student loan payments, etc.) and create a budget off this information.  It will help you determine your repayment strategy and show you where you can and cannot spend money.

There are apps and programs that can help. Third Party phone applications like You Need A Budget (YNAB), Mvelopes, and Mint, as well as software programs like Zilchworks and Quicken, can help you get on track.

3. Set An Affordable Monthly Payment

There is no one solution for everyone. Once you’ve set up your budget you’ll be able to get a clearer picture of what you’re capable of committing to pay each month – no less than the minimum of course so you don’t default.  If you can’t handle the minimum for whatever reason, it is best to talk to the loan manager as they are usually willing to work with you.  It is much better to set up smaller monthly payments over a longer time than default on your loan.

You will get rid of your loan sooner (and pay less interest) if you pay a higher amount than the monthly minimum.  This approach should be a goal, however.  Minimum payments should be considered mandatory for the reasons we’ve listed above.  Side note – if you have a lot of debt, consider looking into the debt snowball payment method as a way of getting out of debt faster.  It won’t be easier, but it works..

The recently created Pay As You Earn Repayment Plan (PAYE) also aims to make paying off student loans more manageable.  

Editor’s Note: I have no experience with this plan so please check with consultants to see if your loan and circumstances qualify you for the program.

4. Research Forgiveness Options

There are some lawful ways to have your student loans dismissed.  There are also certain criteria you must meet to qualify for a student loan forgiveness program. Research available student loan forgiveness programs at the state and federal levels to see if there is a student loan forgiveness program that suits your situation.  In the meantime, make sure you’re keeping up with your minimum payments.

5. Set Up Automatic Payment Options

One of the best solutions for student loan repayment is to opt for an automatic payment option.  These programs will automatically deduct a preset amount each month from your account to pay off the loan.  You will not have to worry about writing a check each month as it will be deducted automatically on a certain date.

Typically, you have the option of picking which day of the month you pay the loan.  This option allows you to do helpful things like schedule your payment for the day after your paycheck is credited to your account.

This approach takes the responsibility of remembering to write a check and mail it (or even just log-in and process payment) each month out of your hands and keeps your credit and status in good standing.

6. Make Extra Payments Whenever Possible

We touched on this item in Step 2, but the best tip for managing your student loans (after not taking them) is to pay them off as early as possible.  You can do this by making extra payments whenever you have a few dollars in your pocket.

When making extra payments, make sure it is explicitly clear that the extra money in your payment is to be put against the principle of the loan and not against the next future payment.  Also, if you have multiple student loans, always apply any extra payments to the loan with the highest interest level first.  This approach will reduce the amount of interest you pay and reduce the total cost of your loan over time.

Conclusion

Student loans are beastly things that are best avoided.  That being said, if you have them, it’s best to service them as much as possible.  We recommend following these six steps and also consulting with the most experienced, informed and active student debt consultants you can find in order to resolve your debt the most beneficial way possible to your current situation. Student loans can be trying but they are survivable.

Financial freedom is something I often preach about here on Suburban Steader. All suburban homesteaders can benefit from being free of financial burden.  How do you get there?  There are lots of ways to go about it.  You can get quite overwhelmed with all the different ways to get to financial independence.  Jim Cobb’s latest offering, Prepper’s Financial Guide, walks you through different topics which will lead towards financial independence.

Book Set-Up

Jim has laid out Prepper’s Financial Guide in a very concise manner as is typical with his books. Each chapter is precise and addresses both the why and how of each topic. The chapters are as follows:

Chapter 1 – What Is An Economic Collapse?

Jim spends some time talking about the definition of an economic collapse as well as describing what can cause one.  He goes into depth talking about some economic collapses in history including Germany (1921-1924), the US (1929-1940) and Argentina (1998-2002).

Chapter 2 – Debt Reduction

The first step in finding financial freedom is debt reduction. You’re halfway home if you don’t owe anyone anything.  Jim discusses topics such as authoring a budget, reducing your realistic debts (debt snowball, anyone?), managing credit cards and cutting your expenses in both soft and hard approaches.

Chapter 3 – Currency

Do you know the difference between commodity and fiat currencies? Want to understand more about exchange rates? This chapter of Prepper’s Financial Guide will set you straight.

Chapter 4 – Precious Metals And Minerals

Most preppers know that gold and silver are the mainstays in ‘prepping currency.’  Jim dives into these precious metals and others.  He also talks about minerals (diamonds, rubies, etc.) in this chapter.

Chapter 5 – Post-Collapse Barter And Trade Goods

Stocking up on vices, consumables and medical supplies is recommended in this chapter because barter items will be the ‘normal’ currency in a SHTF scenario.

Chapter 6 – Bartering Skills Instead Of Stuff

Don’t have any material possessions to trade? No worries. Jim talks about trading time and sweat of your brow in this chapter.

Chapter 7 – Safeguarding Valuables

Safes, hiding spots, and caches – as you might expect – are the main topics in this chapter.

Chapter 8 – Investing In Self-Sufficiency

This chapter of Prepper’s Financial Guide is one of the longer ones.  Jim spends a lot of time explaining how the best way to survive a financial downturn is to reduce your dependence on purchasing power.  Grow a garden, raise your own livestock, learn about medicinal plants and herbs, grow your handyman skill set – these are all skills you can be doing now to reduce your financial dependence later.

Chapter 9 – Putting It All Together: The Home Of The Self-Sufficient Investor

Setting up your property to be self-sufficient and maximize your investments is a key part of being a financially free prepper.  Jim’s exploration of this topic is broad and general due to the fact that each situation will be unique.

Chapter 10 – Final Thoughts

Jim summarizes the books and gives a few parting shots of wisdom.

Why I Liked Prepper’s Financial Guide

You’ll notice that Jim doesn’t have any Earth-shattering information in his book when you compare it to most financial books. Everything he presents is rock solid advice that most anyone will provide AND he paints it in a prepper’s hue. In my opinion, there are a few things in this book that make it a quality addition to your long-term survival library:

• Bluntness – Jim has a history of not sugar-coating anything. An economic collapse situation is going to be tough. Getting your mind wrapped around that idea and accepting it is going to be half the battle.
• Checklists – Much like in Prepper’s Long-Term Survival Guide, Jim disperses valuable checklists in the chapters and provides a large, long barter item checklist at the end.
• Creativeness – Jim’s approaches are not always in line with mainstream thinking.  He’s not afraid to think outside of the box and present unorthodox ideas.

What I Didn’t Like

In my opinion, an economic collapse will bring out the worst in people.  Folks will be capable of doing most anything when they are hungry, thirsty and cold.  I would have expected a bit more in the chapter about safeguarding your valuables.  I think Jim’s view is a little too utopian – although this book wasn’t intended as a prediction of social environments.  I have to say that I was a bit surprised that the “Oldest Profession In The World” didn’t come up in Chapter 6.  I wouldn’t expect Jim to promote it, but I would expect that – if you’re talking about bartering “skills” – the topic would come up.

Overall Thoughts on Prepper’s Financial Guide

I think Prepper’s Financial Guide by Jim Cobb is a solid addition to your long-term survival library.  Most of the financial information and advice provided is no different than the majority of financial books and websites out there, however, the book is written with the prepper in mind.  That last fact makes it a good read.

Disclaimer: Jim Cobb supplied a copy of Prepper’s Financial Guide for me to review. I can assure my readers that I gave it a fair and honest review.

I want to let you in on a dirty little secret about prepping: it ain’t cheap!

Once you get through your “Oh, crap!” moment, you’re going to do the same thing I did. You’ll realize that there’s a whole lot of action you need to take and a fair amount of things you need to acquire. A lot of these actions and acquisitions require money – money you might not have right now. So, what are you going to do to get started?

Go into debt?

Buy it on credit cards?

WRONG!

You’re going to do the first thing I did – sit down and make a plan to get out of debt. If you do nothing else described in this series, you’ll benefit immensely just by getting out of debt and creating financial independence for your family. Not being handcuffed by the credit card companies and banks will make you breath easier and sleep sounder.

Why My Finances?

Your first thought might be “why should I get my checkbook in shape before I stock up on beans, bullets or band-aids?” The answer is simple: without a solid financial backing, you can’t buy anything. Putting yourself into debt just to ‘be prepared’ is detrimental to your cause. You can have all the food store, medical supplies and firearms you can handle, but you’ll be up a creek without a paddle if spend all your money on preps and can’t afford to pay your mortgage or rent.

Where To Start

The first thing I recommend doing to start getting your finances in order is nothing.

Sound counter-intuitive? It is.

You’re not going to change your spending habits, you’re not going to change your income, you’re not going to change your monthly bills. You’re simply going to track your incomes and expenses for the next three months. Tracking this information lets you find out where your money is coming from and where it’s going.

How To Track Your Finances

There are a ton of different ways to track your money.

Some people like the old school method of pencil and paper. And that process works just fine. Write down dates and transactions – incomes and outcomes. At the end of the month, add them up.

Other people, myself included, prefer a slightly more technologically advanced approach. There are many software applications (both freeware and paid) that allow you to track your expenses. We have been using the freeware software Microsoft Money Plus. Yes, it’s Microsoft, but it does a great job of providing a clean interface that allow us to easily track my money. In addition, it allows us to run monthly reports. Plus it’s free – that’s a bonus for this endeavor! You can find it, along with a handful of other free finance tracking software suites, on this site.

Batten Down the Hatches

Now you need to take an honest look at the results of your financial tracking.I’m going to warn you right now – this next step isn’t going to be comfortable.

We spent three months tracking my financial transactions – every paycheck, Dunkin Donut stop and fill up at the gas station. After three months, we was able to generate three monthly reports and get a pretty good snapshot of how we spend our money.

At this point, we could see where we needed to tighten the belt a little. One of our big findings was that we were eating out – ALOT! Those $5 breakfasts, lunch runs and “we’re too tired to cook” dinners were catching up to us. We had a couple of other areas we were unknowingly spending a lot of money.

The next step is to tighten up in your overspending areas. This step will be uncomfortable. Not going out to eat as much as we used to sucked. For instance, I personally felt like I was losing a social aspect of work.  Likewise, we felt we worked hard during the week and deserved to go out to a nice dinner on the weekends. But you know what else we found out? We found out we were able to save some money in just a few months. After tightening the belt a bit for a few months, we were starting to see our income trump our expenses for the month (you’re still tracking your finances, right?).

We made a list of our debts – credit cards, loans, mortgages, etc. And we also stumbled upon Dave Ramsey’s Debt Snowball. Spend some time reading up about this approach on your own, but the premise is this:

Pay off the smallest debt first by adding additional monthly payments while still paying your regular monthly payments to all your bills. Then you take the money you were paying monthly on the first bill and tack it onto the payments for the next smallest bill. Once that loan is paid off, you take the money you were paying on the first two loans and attack the third smallest loan with that extra monthly money. And so on, and so on. Essentially you’re paying the same amount every month, but your debt starts to disappear.

Download the Debt Snowball spreadsheet from Vertex42.com

We’re in the middle of this process – approaching some of our bigger loans – and can honestly say it works. Dave Ramsey has a pretty good approach to financial security – give him a chance.

Financial Independence – Now What?

So you’ve paid off everything with exception of maybe your mortgage. What do you do now? First – give yourself a giant slap on the back. You’ve done something that most folks don’t think is possible. You’ve used what you have to get out of debt. You can breath easy. You can sleep sound at night. Next – make yourself a promise. Promise yourself that this will NEVER HAPPEN AGAIN! Make smart decisions, don’t finance your wants and live debt free. Now you can prep with an open mind.

You’re probably asking – do I need to take care of my finances before I do any prepping?

The answer is YES…and NO.

First, remember that building up your financial security is a big part of prepping, so don’t overlook it. Second, realize that you can do small things on a daily, weekly and monthly basis to build up your preps. We’ll get into different ideas when we talk about water and food storage. Also, if you can find ways to augment your income, you can justify making a ‘prepping fund’ where you can save money and put it towards prepping. This approach doesn’t strictly follow Dave Ramsay’s advice, but I have found that allowing yourself an occasional ‘reward’ does help you keep on the straight. At least for me, sometimes I need something more than seeing the monthly statements disintegrating before my eyes. Just be sure that your occasional treats don’t overtake your debt reduction process.

I hope you enjoyed this first article on Prepping 101. I am happy to answer any questions in the comments section here or on Facebook. If you don’t want to make your question public, you can always email me at dan AT suburbansteader.com. Keep an eye out for our next Prepping 101 article on identifying what you’re doing that’s working against self-sufficiency.

photo credit: psyberartist via photopin cc