Being self-employed indeed comes with pros and cons. On one end, you’re able to be your own boss, design an ideal work environment and schedule, and have the freedom to make meaningful decisions about your business. On the opposite end, it’s hard work—and you’re generally living off a variable income stream. On the typical biweekly payment schedule, employees have a pretty good idea of the amount of income they’ll receive every other week. When you don’t have a fixed income, budgeting for bills and other expenses can be challenging.
This is especially true if you’re trying to pay off your student loans in Arizona. So, what can self-employed individuals with an unpredictable income do to ensure they meet the demands of their student loan repayments? If you’d like to know more, consider the following tips.
Track Your Regular Monthly Expenses
With a fluctuating income stream, it’s critical that you be conscious of all regular monthly bills, such as rent or mortgages, car payments, health insurance, tax payments, and business expenses. Track all of your mandatory and discretionary expenses on a spreadsheet, and design a budget to manage those expenses. While mandatory expenses are costs regarded as necessary, discretionary expenses—eating out, shopping, and vacationing—are non-essential costs composed of wants rather than needs. So, where does student loan debt fall?
Unarguably, paying your debts is mandatory because it’s required based on your commitment to a lender. Student loan debt is not something you can throw on the back burner until you’re ready—it’s an expense that must not be cut from your budget, or you risk defaulting your loans and, in some cases, filing bankruptcy. Creating a budget that includes your monthly student loan payments as a necessary expense may help you spend and manage your money wisely.
Prioritize Your Student Loan Bill
Prioritizing your student loan bills in the same way you treat your housing or insurance bills is vital to your business and future. Once you have no outstanding student loan debt, you’ll have more money every month to allocate to your business, savings, retirement, or even those “wants” you’ve been sacrificing for some time. Of course, knowing how or where to start in the prioritization process is difficult, especially if you have multiple student loans.
A general rule of thumb is to start paying loans with the highest interest rates. Once those are determined, take a look at whether you have private or federal student loans—keep in mind you may have both. In almost all cases, paying your private student loans should be a priority. This is because most private lenders don’t offer borrowers the same protections and repayment options as federal student loans, and the default system for private student loans is much harsher.
Create an Emergency Fund
If you’ve been self-employed for a while, you may have a good sense of your monthly income averages. However, those who are new to self-employment may not feel confident about their expenses and financial future. When you are unsure of your income, you may feel hesitant to make payments towards your student loans.
By building an emergency fund, you’ll be well prepared in advance for any unexpected or sudden changes to your income. These funds will come in handy when making your student loan payments and other expenses when your business isn’t doing too well.
Start by setting aside three to six months’ worth of living expenses in a savings account, and don’t plan on accessing them until you have an emergency. For instance, you may have a $200 monthly student loan payment that you regularly pay, but if business sales come to a halt, you may need to utilize your emergency fund to get you back on track. Once your income rises, you can replenish the account with the amount of money you took out.
Debt Settlement Program for Self-Employed Borrowers in Arizona
Unfortunately, there are currently no forgiveness programs available for those who are self-employed. Self-employed borrowers in Arizona are left with one of two options—pay off their loans using an income-driven repayment plan or pay the full amount of their balance. While some lenders offer the option of deferment or forbearance, these are only short-term solutions. Luckily, there is one other course of action self-employed borrowers can pursue: discharging or settling their debt to a fraction of what’s owed.
The experienced debt attorneys at McCarthy Law PLC can strategically negotiate with lenders to resolve your outstanding debt in the most efficient way possible. Here at McCarthy Law, we aim to help the residents of Arizona find solutions and, more importantly, make conscious decisions regarding their debt-related problems. Learn more about our debt settlement program by calling (855) 976-5777 or filling out a contact form today to schedule a consultation with one of our Arizona debt settlement attorneys.