Personal finance

Paying off student loans? Here's how to budget smarter

Budgeting can be a loaded word. Thoughts of penny-pinching and missing out on fun activities may come to mind for most people, but done properly, budgeting can be empowering—you just have to think of it as taking ownership of your finances. Once you understand how money works in your life, you can shape out your financial future with confidence.

One of the biggest perks of budgeting is the ability to pay off your student loans with clarity and laser focus. Take a look at these strategies for building a budget that fits your lifestyle and helps you reach your goals with a positive money mindset.

Get to know your money

Start by figuring out your income and expenses. Write down your net income—the amount you take home after taxes and deductions like your health insurance or 401(k). Next, spend two months tracking expenses to understand how your money is spent. Use a spreadsheet or a budgeting app like NerdWallet,, YNAB, Every Dollar, etc. Resist the urge to second guess your purchases or beat yourself up for lattes. You'll make decisions later about how to spend your money.

Dream up your financial goals

Creating financial goals can be done in two simple steps. First, write down 1-3 important things you want to do with your money. Paying off student loans probably tops the list, but there may be other goals like saving for retirement, creating an emergency fund, or making a big purchase. Next, write down why these goals are important to you. Does paying off your student debt represent financial freedom? Will you feel more successful? Will your life be less stressful? These reasons can serve as great motivation as you continue budgeting down the road.

Look at the big picture

Now that you've tracked your money and set some goals, get real about your finances by studying your spending. Look at it with the big picture in mind. Budgeting apps can show you trends or charts for spending categories in a matter of seconds, so it should be easy to identify where your money is going. What do you spend the most on? What do you spend the least on? Is your spending aligned with your financial goals? Are you surprised by anything? Your answers will tell you how far apart your spending actions and financial goals are so you can consider changes.

Carve out your budget

There is no "one-size-fits-all" solution to budgeting. You just need to pick a system of budgeting that works for you. If you like a more formulaic approach, try the 50/20/30 guide. Live in an expensive city? Ditch the 50/20/30 and build a custom budget that accounts for your unique expenses. You're really just looking to break down your costs to meet your goals.

Your fixed expenses (e.g. housing, utilities, student loan payments, and transportation) can serve as the basis of your budget. Flexible expenses (dining out, clothes shopping, or entertainment) can be shifted, or eliminated. This is also a great time to get ahead of your spending by planning for the unexpected.

The key is to create a budget realistic for your lifestyle. If you love to eat out or can't live without Amazon Prime, then budget for these things at the appropriate scale to meet your goals. Is paying off your student loans your one, burning desire? Budget for it and get strategic about your payments. You can put more money toward your student loans by cutting your expenses, and you can supplement your efforts by researching debt payoff methods or refinancing for a new loan with a better interest rate and terms.

Shift your mindset around student debt

While budgeting will move you forward in paying off your debt, you don't want to be miserable in the process. Approaching student loans with a positive mindset can make all the difference. Keep in mind that where your focus goes, energy flows. If you've been steadily paying down debt for a while, focus on what you've paid off instead of the balance.

Feeling stagnant in your payoff progress? Find new ways to make more money to pay off your loans faster. You can try side hustling, selling things online, or jumping into the sharing economy. Take your pick! Just remember that you've made money before, and you will make it again.

When we start to think of budgeting as a form of empowerment, instead of something that holds us back from having fun, it becomes that much easier to prioritize our spending. Creating a budget may be just the nudge you need to take your student debt payoff plan to the next level. Whether you decide to scale back on spending, look into side hustling, or research refinancing your loans, crafting a budget that speaks to your unique dreams will help you become more mindful of how you approach money and measure your progress as you work to create the life you want.  

Refinancing your student loans can be a great way to free up money in your monthly budget.

Subscribe to our newsletter:

Subscribe to our newsletter: