You can ask any question using the form here.
Hi Sherry! I’m about to live off of a line of credit for three years in a very intense school program (aka no room for a job, but with high payoff once I graduate).
Do you have any tips on making sure I don’t go crazy with my line of credit and instead budget my debt appropriately?
Oh how I wish I could turn back time to when I was in school with a line of credit thinking it was ‘free money’ and not thinking about paying it back. I AM SO HAPPY YOU ASKED THIS QUESTION because now I can give you advice I wish I had given to my clueless AF self back then.
Create a budget and track everything
I feel like this was the one thing that would have truly kept me in line. Here’s how I’d approach it: you know how much money you have for the years to live, meaning if you have a line of credit of $25,000 a year, that is $75,000 the 3 years.
$25,000 = $2083 a month
With the annual ($25K) or $2083/month number, depending on how you want to approach it, you could remove tuition and all your fixed stuff from the $25K, AND THEN look at what is “leftover” each month, and budget that for groceries, variables etc.
OR.. you could just look at the $2083 a month and budget that. I have no details for you, so take either approach, but make sure you plan for your money.
You need to also now, know what you are spending. It helps you see where you are spendy, and where you are fine (I am spendy on things like shopping, and eating out, so I am definitely someone who needs to watch those line items).
Remember this is DEBT, not FREE MONEY
Sounds silly right… but it’s true. Had I put it in my mythical spreadsheet that it was ALL IN RED AS DEBT and my net worth tracking would dip with each month, I would not have thought it was a free and open line of credit to shop with my student loans (true story).
Let yourself live a little, but within reason
Out of that budget, depending on what you have leftover, consider setting $50 aside, up to $100 (?) or more, to use for things like… buying a fun book. Shopping. Having a coffee out. Or if you don’t spend it for that month, you can save it up and rollover to the next month, and treat yourself to a massage in 3 months for instance.
Don’t go hardline, zero spending. If you and I are anything alike, you will freak out and flip the other way.
Study, or read for fun instead of shopping
Maybe this applies only to me… but when I get bored, or stressed, I shop. I like browsing online. What helps if if I ACTIVELY do not let myself even go online, and I force myself to pick up a book to read, or go for a walk, or buy an outside drink and let myself sip it as I go for a long walk to calm down.
If you set goals of what to spend, not spend, net worth or whatever, it might remind you that this is DEBT. It certainly would have helped me, considering my interest rates were nowhere as low as they are today (think 5% and 7.5%)…. so all that interest I wasted, really shocked me when I first graduated.
Sherry, we had a falling out years ago and I’m truly genuinely sorry for how I acted towards you.
[Response snipped for privacy – But thank you]
Apology accepted. Thank you for replying. I actually don’t use Facebook any more (I deleted it), and am keeping all social media to a very low profile. I’ll email you as well, but I hope you see this post.