Do you see everyone around you moving forward while you are stuck in one spot? Are friends taking vacations and buying homes and you’re eating bean soup and living in a tiny studio rental? We’ve all been there. What’s important to remember is that you are not alone.
Take student loans, for example. None of us can afford to pay tuition outright and for that reason, most of us spend a lot of time buried in student loan debt after college. In fact, more than 44 million Americans currently have student loans, and Americans held nearly $1.38 trillion in student debt at the end of 2017, according to the New York Federal Reserve.
Personal finance expert Kevin O’Leary has shared some advice though, regarding student loan debt: Pay them off as soon as you can. The longer you pay them off, the worse that debt will be.
“Get rid of that student debt right up front while you’re young and frisky, that’s the time to do it,” the star of ABC’s “Shark Tank” tells CNBC Make It.
He says that instead paying a little bit at a time, make paying off your student debt your first priority after graduation. “You should pay that loan off in 36 months if you can do it,” O’Leary says.
Of course, not a lot of us can do it, in fact many of us have no savings and income that just doesn’t leave a lot of excess. But the sooner you pay it off, the less you ultimately owe.
Of course, there will be sacrifices. According to O’Leary it means “you’re cutting back your lifestyle significantly. You’re spending up to 40 percent of your paycheck just to get rid of it. Why? Because it’s a very nasty thing to have hanging over your head for a very long period of time,” he explains.
And he’s right. It’s easy to imagine that it will be easier to pay off all your loans a few years later when you are earning a higher salary, but O’Leary argues that by that point, you will also have higher expenses, less time and more responsibility.
“The minute you establish a lifestyle and you start going out for dinner, and you start dating or you get married, all of a sudden, you have all kinds of other expenses, not necessarily just paying off your loan,” O’Leary says.
“That’s why you want to pay your loan off as fast as you can, before your lifestyle starts to really creep in on you and make you spend more on things like vacations, and dating, and dinners, and when a child comes along, all of those expenses.”
O’Leary maintains that focusing on the short-term will spell long-term savings.
“I know it sounds like a lot, but really smart people figure this out pretty quickly and they focus on getting rid of that debt,” O’Leary says.
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