Maddie Brooks, Prudential Advisors (Image: Brooks)
A survey by psychologist and author Dr. Robert Epstein found that 25% of our happiness is determined by how we manage stress. Epstein also found that one of the magic bullets in reducing stress is planning.
Financial planners, like Dr. Epstein, say itâ€™s in those anxious moments, however, that good planning will see you through.
â€œIt may seem like thereâ€™s no light at the end of the tunnel,â€ says Maddie Brooks, a financial professional with Prudential Advisors. â€œThe key is to keep a level head, come up with a plan and stick to it.Â Student loan debt is a very emotional area.Â Spending all of that time and effort on your education and ending up in debt is frustrating. You have to first change your mindset and keep it in perspective.Â Having a plan helps that happen,â€ she adds.
Brooks says there are 3 things to consider when creating a plan.
1. Look at your total financial picture: Figure out everything you have coming in and your monthly expenses. When you see whatâ€™s coming out and going in, itâ€™s an eye opener. A lot of people donâ€™t know where their money is going. When those numbers are known, you can develop a course of action.Â You can see what adjustments need to be made in your financial choices and lifestyle.Â Itâ€™s about mind-set.Â Itâ€™s changing a value system, itâ€™s all of that.Â Itâ€™s changing the way you think about money.Â If you donâ€™t get to the root of the problem, you wonâ€™t change your behavior. Knowing your numbers help you see what youâ€™re really doing.
2. Know your retirement number: When you know that number, you can back into a plan.Â Many of us get so caught up in paying the loan back that we short change that saving.Â As far as figuring out how much to save, that is going to be determined by where you want to live.Â If you plan to live in the Northeast for example, you need a plan to save at least 80% of what your income is.Â Â You’ll need 60% if you plan to live in Texas.Â Also consider how much you can expect from things like social security and 401 (k)â€™s. When it comes to paying off student loan debt and saving for retirement, you must do them at the same time. One is not more important than the other.
â€œA side note on that, many parents donâ€™t want to hear this. They want their kids to have the best education and donâ€™t want to think about the debt on the back end. They need to be willing to think outside of the box.Â For example, they might want to send their kid to a junior college for 2 years and then transfer to their childâ€™s school of choice.Â It doesnâ€™t matter if you start at a junior college and end up at a more prestigious school, because the credits are the same. Parents must remember that their time horizon for retirement is shorter than their childâ€™s. If theyâ€™re going to take away from their retirement assets, they should look at other options. The child may resist, but parents must act like parents.â€ says Brooks.
3. A stress-free side hustle: The reality of the world we live in today is that for many people, the numbers donâ€™t add up, even when theyâ€™re doing all of the â€˜rightâ€™ things. They are going to have to find ways to supplement their income in order to keep their finances in balance. Picking the right side hustle is important because youâ€™re adding work and stress to your life when youâ€™re already stressed out about student loan debt. That can affect your health. Itâ€™s important to find something youâ€™re passionate about. I have a client whoâ€™s a teacher, for example, and she tutors on the side. It doesnâ€™t feel so much like work since she loves teaching kids.
Brooks says the most important thing to remember is that student loan debt is like any other challenge in life. If we stay focused and stay on course, we overcome the struggle.