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6 Steps to Move From College Debt to Financial Success

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Editor’s note: This is part 2 in a five-part series on growing and maintaining wealth. Read part 1.


I grew up thinking that a college degree would be my ticket to wealth or at least entree into the upper echelons of the middle class. After spending most of my 20s digging my way out of $65,000 worth of student-loan and credit card debt amassed after completing a bachelor’s degree in political science and master’s degrees in both bilingual education and organizational leadership, I realized that the correlation between a college education and wealth-building was a pretty weak one.

While my credentials positioned me to earn more—my income nearly tripled from my first degree to the third—my degrees did not position me to save more, invest more or improve my credit; only strong money-management skills positioned me to do that. And those skills were acquired over the course of my 14-year journey toward financial freedom.


Here are six wealth-building strategies and principles that I applied to build my financial foundation. Use them to build yours.

1. Get organized and knowledgeable about your student loans. Part of being a college graduate is being responsible and informed about your student loans. Take several weekends to educate yourself on the ins and outs of your student loans. Create virtual and/or real folders to organize the following information.

  • The type and number of loans that you have. Do you have subsidized and/or unsubsidized loans? Do you have federal loans, private loans or both? Keep the name and number of your lender or lenders in your phone, on an Excel file on your computer, and as a hard copy for easy access.
  • The exact cost of your loan(s). You need to know how much money you owe and the amount that is accrued monthly to the penny so that your efforts to eliminate debt are grounded in accurate numbers instead of approximations.
  • Your options for loan repayment. Have you educated yourself on the various federal loan-forgiveness programs, the Pay As You Earn repayment plan, or the discounts applied to student-loan payment agreements that elect automatic withdrawals from your checking or savings accounts? Researching these options can save you hundreds, if not thousands, of dollars on your student-loan payments.
  • The life of the loan in years. How long will it take to repay your loan if you only make the minimum payment? How long do you want to carry this debt? There are opportunity costs for prolonging the repayment process; extending the life of your loan or loans can delay the purchase of your first home, starting a family or new business, paying for a wedding, or quitting a job.

2. Live at home for as long as you can. Without the burden of high rent prices, you can start to build a six-month emergency fund, save to buy your own home, make a big dent in your college loans and allow for more risk taking. With this safety net, you can say yes to low-paying, high-passion opportunities, entrepreneurial ideas, internships and travel opportunities, thus preparing you for bigger, greater and more meaningful long-term gains.

On the other hand, if living at home is not an option, scout out neighborhoods and cities that will eat up less than 30 percent of your total take-home pay. This may mean having to share your space with roommates to keep your costs low and shop sparingly for home furnishings.


3. Understand that everything has diminishing returns, including education. This may be a hard pill to swallow, especially, since we, as African Americans, have been historically and systematically locked out of access to higher educational opportunities, but pursuing graduate studies for the sake of pursuing graduate studies or “enriching” your life is a waste of money if you are not clear about the financial returns on that investment and if you are already knee-deep in debt.

If you are committed to lifelong learning, consider a certificate course, self-study or one of the many low-cost or free online opportunities that some of the most prestigious colleges and universities offer, until you are 100 percent certain that you need that second or third degree.


4. Aim for the 50-30-20 rule when it comes to budgeting. Wealth is a decision. It is a lifetime sum of day-to-day financial decisions, which begins and ends with tracking your spending and knowing the difference between needs and wants. If you need a budget starter tip, try the 50-30-20 rule. Use 50 percent of your income for your needs, 30 percent for your wants, and 20 percent for your savings and investing. If you want to jump-start your journey to wealth, flip those last two percentages: Save and invest 30 percent of your income and use 20 percent of your income for your fun, wants and desires.

5. Use your youth to your advantage. While making universal mistakes, trips and falls in the way of career and love are all a part of growing into your adulthood, your 20s do not have to be your “throwaway” decade when it comes to building a legacy of wealth. Speak to your human resources representative about enrolling in your company’s 401(k) program, tax-deferred annuity program or the like so that you are on solid footing for retirement. Speak to a financial adviser about your investment options so as to educate yourself on ways to generate passive income. With compound interest and youth on your side, you will be confident that your quality of life will not suffer once it is time to leave the workforce.


6. Monitor and manage your credit score: There will definitely come a time when you will need to make a big purchase (e.g., buy a home, start a business). In many instances, you will need to leverage your credit score to complete the purchase. You will want to secure a loan with the most desirable interest rates. Since the Fair Isaac Corp., or FICO, score is arguably the best-known credit score, it is crucial to know what constitutes poor, good and excellent credit scores through this lens. FICO scores above 720 generally receive the best rates. On the other hand, with FICO scores of 660 or lower, you run the risk of enduring hefty interest rates or, worse, not qualifying for loans at all.

For competitive credit scores, limit your credit card spending to only necessities, maintain low credit-to-debt ratios, pay your bills on time and refrain from opening up new credit cards unnecessarily. Also, order a free copy of your credit report and purchase your credit scores annually to monitor your growth, check for mistakes, and make long-term plans.


This is a superexciting time in your life. Life after college is full of unexpected changes, joy, pain, and leaps and bounds of growth. Make sure that as you pursue your passion, fight for love, find your voice, and stake out your claim, you are also tending to your finances—building personal, and possibly generational, wealth along the way.

Kara Stevens is the founder of the personal finance and lifestyle blog The Frugal Feminista, an online home for financial empowerment, girl power and juicy living. Connect with her on Twitter.

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