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May 23 2011 12:00AM

Question


What advice do you have for students who want to create a budget and pay their student loans?

Answer


FPA member, Keri A. Hughes, CPA, CFP®, vice president and senior wealth planner of PNC Wealth Management, said there are many low-cost resources available to assist you with budgeting. They are available both online, and in the form of software, which you can purchase at bookstores, office supply, or computer supply retailers.

In addition, here are some professional guidelines to help you with implementing these tools:

  • First, when you get a job, begin to save for an emergency. You want three to six months of expenses in a readily accessible saving account. This will help prevent running up expensive credit card balances if an illness occurs, or a major purchase is required.
  • All debt is not necessarily a "bad thing." Mortgage and student loans are usually the least expensive. Other types, including consumer debt, credit cards, and sometimes auto loans, are more expensive. List your debts by interest rate. Pay off the highest rate loans first, while making the minimum payment on the lower rate loan.
  • Once the less favorable debts are paid and you have some savings, begin to maximize your tax advantaged, and "matched" savings like IRA, and 401(k) plan contributions. It is a good idea to begin saving for retirement early, even while you have a student loan outstanding. Time is your best friend in this case. The advantages to saving in this way typically far outweigh the cost.
  • Now you have created a solid foundation, you can begin making larger payments on your student loans if cash flow permits. Remember to always keep some cash available for a rainy day, week, or month. Student loans were designed to help you get on your feet, and buy you a valuable life time asset. Nurture your health, education, and career. That loan will be gone before you know it.

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