1. Get organized and figure out exactly what you owe
It’s hard to stay on course without a map, and when it comes to financial independence, you’ve got to know where you are and where you want to go. Start by taking inventory of all your debt including student loans, car payments, mortgage, personal loans, credit cards, etc. Next, take a close look at your terms, interest rates, payments, and other pertinent information so you can start steering your finances in the right direction.
2. Understand your options: consolidation vs. refinancing
Now that you’ve got a clear picture of your debt, you can decide whether you’d like to consolidate or refinance. Consolidation is great if you have multiple loans or credit cards. For example, if you have multiple credit card balances, you may be able to consolidate them into one card or even get a personal loan with a lower rate.
In the same way, if you have multiple student loans, you can think about consolidating them and/or refinancing them. If you choose to refinance, you may be able to save money with a lower rate and/or pay off your debt quicker with a shorter term.
3. Maximize your tax deductions
Tax deductions are a great way to relieve your financial burden. With student loans, you can deduct up to $2,500 of student loan interest each year. To qualify for this deduction, your taxable income can’t exceed $80,000 per year ($160,000 if filing jointly) and the student loan interest must have been paid during the applicable tax year.*
4. Know your goals and think long-term
What are your goals? What are the milestones you will track until you get there? Will you be buying a house in a few years? In order to get from point “A” to point “B,” you’ve got to have detailed directions to a vision for your future so you can take action and get there successfully.
*Please consult your tax advisor for advice related to your specific tax situation. Taking itemized deductions may not be the best financial choice for you depending on your individual circumstances.