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How to Start Saving While Paying Off Your Debt


Your career is beginning to take shape, and with any luck, you’ve started to earn a salary that allows you to put a little money aside each month. You know that saving is important, but there’s one nagging problem...Debt.

Most of us have it in some form, from student loans, to car payments, to mortgages. So, how do you pay off your debt while still setting money aside for the future?

Millennials and Debt

If you’re a millennial, chances are good that you have debt. Your generation has the highest debt exposure of any group since 2007, to the tune of more than $1 trillion. The average 18- to 34-year-old has personal debt in the neighborhood of $36,000, most of which is in student loans.

If this sounds like you, there is a silver lining: Millennials now spend less than other generations, and a large majority of them (79 percent) are taking steps to knock out all their debt by the time they hit their early 40s. One major perk to debt repayment is that it can raise your credit score (you want to aim for 700 or above).

What steps can you take to pay off debt?

Figure Out What You Need

How much money should you save? That depends on a variety of factors, but a good rule to follow is to have 3-6 months of living expenses in an easily accessible emergency fund and a diverse investment portfolio. If your employer matches contributions to a 401(k) or 503(b), so much the better. If not, there are many other options that allow you to grow your retirement savings.

Financial gurus recommend using 5 percent of your salary to pay down debt. If you’re unsure of how to begin, there are several things your bank can do to help:

Make a Plan

Here are a few guiding principles as you dip your toe into debt repayment:

  • Not all debt is created equal. If student loan debt is your biggest concern, you’ll want to first tackle other personal or credit card debt, which often has higher interest rates.
  • However high or low your debt load is, your first order of business is to always make your minimum monthly payments. This gets your credit history on solid footing, and your student loan payments may even give you a tax break of up to $2,500.
  • Ask your loan provider regularly about refinancing to lower your rates.

Kick Your Career into High Gear

Now is the time to crank up the ambition and networking to put your career playbook into action. If you plan to start a family in the near future, it’s all the more important to make yourself invaluable now, so that your employer will welcome you back with open arms when you’re ready to return to the workplace.

When it comes time to look for the next job on your career path, consider a company that helps with debt repayment. In 2019, approximately 8 percent of businesses offered this perk, double the number from three years earlier. The list includes heavy hitters such as Fidelity, PwC, Aetna, and Abbott, which makes a 5 percent pretax contribution to its employees’ 401(k) plans, provided those workers use at least 2 percent of their salaries to pay down student debt.

Spend Less, Save More

Millennials are bigger spenders, by and large, than previous generations:

  1. 79 percent pay good money to eat out.
  2. 76 percent will shell out for the latest gadget.
  3. 69 percent spend on clothes they don’t need.
  4. 60 percent drink coffee that costs more than $4 per cup.
  5. Approximately 50 percent use credit cards to pay for everyday necessities.

Left unchecked, these habits can get in the way of many long-term goals, including paying off debt. The solution is obvious, but difficult. Weaning yourself off these splurges takes time and discipline.

And if you are fortunate enough to come into an unexpected windfall (inheritance from a distant aunt or a hefty bonus at work), the temptation to splurge can get even stronger. But this is a perfect opportunity to knock off a bigger chunk of your debt while putting some money away for retirement.

You Can Do Both

The good news? There’s still plenty of time to both save and pay off debt! Check out our monthly payment calculator to help you figure out what your monthly payments could be. 

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