Help! I want to start a business but I have student loans.
Let me first by saying that I am in no way a financial expert and anything that follows this statement is of my own experience and all opinions are my own.
If you want to start a business but you have student loans there are a few things you can do that I did to help find what will work best for you.
When I graduated in 2010 I had accumulated a decent amount in student loan debt. My education was 100% self-funded. My loans were made up of private, federal and parent plus with interest rates ranging from 3.24% variable LIBOR to 7.75-8.4% fixed.
It is key to remember that everyone’s situation is different including their risk tolerance. To say there is a one size fits all answer to this question is not possible. Everyone has different financial goals, things they want to achieve and different values that will dictate their actions.
Here are 3 steps I recommend that will ultimately help you find clarity and put together a plan.
First - Set the stage
Understand how much do you owe along with corresponding interest rates.
First things first, how much do you own? What is the total amount? I found it helpful to create an excel document that has the name of who the loan is with, login and password (I also suggest using Lastpass instead of keeping that information on a Googledoc or somewhere that it could be hacked), the interest rate, monthly payment and amount left to pay for each loan.
There are different ways you can track this - you can login manually each month to see or if you use Mint, it will automatically update the information for you.
By doing this it will help you prioritize and you can ask yourself, “Are there any loans with an extremely high interest rate that I should make a goal of paying off before quitting my job?”
Second - Take inventory
What does your budget look like? Do you have a budget?
Do you rent or own? If you rent, when your lease is up could you move into a smaller place that would save even $100 a month? What about cars? Would it make sense to see your vehicle and buy a beater in order to not have a monthly car payment?
Again, everyone is different.
If you’re looking for tools to help you budget you can check out my blog post, “My 3 Favorite Money Management Tools” HERE.
Third - Make a plan
Now that you know how much you owe and interest rates, and your monthly budget it is time to make a plan. Do you want to pay your loans off entirely before you launch your business? Do you want to pay off the loan with the highest interest rate and then start your business? Whatever it is, make a plan.
How are you going to do it? Are you going to make better money decisions? Pick up a part-time job? Write it out on a piece of paper and set deadlines.