By Jasmin Brown

BDO Debt Solutions

Prioritizing Debt After Graduation

May 17, 2022 | 12:46 PM

Many students are just finishing up their final year of study. Many important life decisions are made after graduation. This is the time that new graduates are deciding what job they want to take, where they want to live, and what they want their future to look like. Another big decision that many students will also inevitably have to make is how or when to repay student loans. Many students have also opened other credit facilities and have more than just their student loans to pay off.

It is important to know how to prioritize repayment of debt. Below are some helpful tips:

1. Always make your minimum payments. As you take on new financial responsibilities, building and maintaining good credit is very important. That’s why you should always pay at least the minimum payment on your debts. Make more than the minimum payments whenever you can. This will not only help you pay your debts faster, but you will also save on interest charges over time.

2. Pay off high-interest debt first. Whether it’s a student loan, a bank loan or a credit card, juggling multiple debts can feel overwhelming. One way to alleviate some of this stress is by focusing on your highest interest debts first, also known as the debt avalanche method. While still making the minimum payments on your other debts, take any extra income or money you have, from graduation gifts, or tax refunds, and put it towards your highest interest loan. Doing so will minimize the total amount of time it takes to get out of debt since interest won’t accumulate as quickly.

3. Pay off smaller loans quickly. There is a sense of accomplishment that comes with paying off a debt. As you make your plan and budget for debt repayment, don’t underestimate the good feeling that can come with paying off even a small debt. The feeling of accomplishment may help give you some extra momentum when working toward debt repayment.

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4. Create a budget. Having a budget is the first step in organizing your money. This will become increasingly important as you leave school and enter the workforce. A budget is a personal plan that tracks your spending to help you make sound financial decisions. It is a working document that should be updated and changed regularly as your life changes. If you need help with getting started on creating a budget, this article will help.

5. Avoid accumulating more debt. As you enter the workforce and leave your years of being a student behind, you will probably have more disposable income than you are used to. It may be tempting to spend money either on things or experiences. Just make sure that what you are spending fits in your budget. Avoid overspending and relying on credit to fill the gaps. Once you start allowing yourself to overspend, it can be difficult to stop.

One big advantage of making debt repayment a high priority is that once you’ve paid off your student loans and any other debts you may have accumulated, you will be able to reassign that money to your other financial goals. Simply finding the repayment method that works for your lifestyle can mean getting out of debt sooner than you expected.

For more ways to stay motivated and stay on top of your finances, keep an eye out for my next column. If you are having trouble making ends meet each month, finding the right debt solution can help. Visit the BDO Debt Solutions website for more information about bankruptcy, or call 1 855 BDO DEBT to book a free, no obligation consultation.

Jasmin Brown is a Senior Vice President overseeing the insolvency practice in Saskatchewan. She is committed to providing creative and practical debt solutions with empathy, understanding and professionalism to help people overcome their financial difficulties.