How to Handle Multiple Loans without Falling Behind

You cannot create a good plan of attack if you don’t know anything about your enemy. You need to identify all of your debt, and gather as much information as you can about it. As an example, you should know the loan type of all the loans, the terms of the loans, and the contact info of the money lenders. It’s best to put everything on paper like this:

• Loan no.1- Student loan, monthly payment amount, interest rates, repayment term and due date. Money lender name and contact info.

You should have a similar block of text for every loan that you have. This will help you keep track of everything. You want to know how much you need to pay each month, because you need to know how to budget every month. You should know the due date because you don’t want any late payment fees. And the contact info are helpful in case you need to contact the lender for whatever issue. As you can tell, having this information on speed dial can make the process less stressful. This is the first step towards the planning that will help you handle multiple loans.

Monthly Planning

Each month should begin with planning where every cent will go. The first thing you should put down is how much money you are earning every month. Then, this money should be split into: fixed and variable expenses. Fixed expenses are the ones that don’t fluctuate too much, like your loans and the utilities. These are the most important payments that you need to do. Then, the variable expenses are usually referring to groceries, entertainment and even transportation. Your Netflix subscription and your gas should go into this category. After these two categories are paid for, if you have any money left, you could put it towards saving or doing some fun activities.

Budgeting Rules

One of the most popular budgeting rules is the 50/30/20 one. To put it simply, 50% goes to needs, 30% goes to wants, and 20% goes to savings. The 50% are basically the fixed expenses. So, your loans, utilities, but also the groceries. Everything that you actually need, what you cannot live without, should be in this category. Needs can be different for everyone, so it might look different for you. The idea is that your needs should be covered with 50% of your monthly income. 30% of the remaining money should go to the things that you want; like your Netflix subscription. The remaining 20% should go towards saving. You could either save it the traditional way, or you could invest it. Check out this article by Investopedia on this rule.

But as you probably guessed by now, this rule doesn’t work for everyone. You could switch to 50/20/30 if your budget allows you to. The problem is that a lot of people cannot pay their needs with only 50% of their monthly income; or don’t need that much for their needs. That’s why there are a few other rules. Keep in mind that the mechanism is the same; first the needs, then the wants, and the savings:

• The 40/30/30 rule
• The 60/20/20 rule
• The 70/20/10 rule
• The 75/15/10 rule
• The 80/20 rule – 80% for needs and wants, and 20% for saving

As you can see, there are many options out there. If none of them work for you, you can always create your own rule. But, it’s important that you keep the three categories. Saving even a small amount can make a change one day. Plus, knowing that you have to put an amount into savings each month can help with overspending. If you don’t have a limit, it’s easy to just spend all the money on things you don’t really need. This article by Thrivent talks about the importance of budgeting.