Last week I wrote about how my student loans will be too big of a burden to bear, at least at first. So, all whining aside, what am I going to do about that?
Well, obviously Objective 1 is to get a job and to make money. Those loans are going to come due, and quick! One of them doesn’t even have a grace period – the first bill will be due one month after I’m no longer taking classes, so probably in late March or early April. The next loan has a six month grace period, so I can expect bills for that starting in late August/early September. And the final cherry on my loan pie will start come due starting around the new year.
But, as I said, work may not be enough. I make enough from my little "side hustles" that I can cover Loan #1 when it starts billing. And I’m really hoping I’ll have a job that can cover Loan #2 by August. But with rent and gas and other bills, it’s Loan #3 that will start to give me a hardship.
Is it ok to… start relying on my credit cards at that point?
Whoa, whoa, whoa, calm down and stop screaming! I know, that sounds bad. I was in credit card debt once before, and the prospect of getting back into it doesn’t really excite me. But it might be necessary, if I don’t make much (a huge possibility) and my Getting Established fund and Emergency Fund run out.
Suze Orman actually gave me the idea for using my credit cards, in The Money Book for the Young, Fabulous, & Broke. She has some rules, though, concerning this action:
- A credit card can be used to help you make ends meet, but you’ve got to cut everything down to bare bones, first. It’s not for "blowout vacations, a closetful of expensive clothes, and going out four times a week."
- Keep monthly charges at or below 1% of your annual gross income. For example, if you make $30,000, charge no more than $300 per month.
- She doesn’t say it, but she says it elsewhere in the book: keep paying the minimums, don’t fall behind!
- Reexamine your situation every six months or so – decide if you can continue to charge for another six months, or if it’s time to rethink your career path.
I have a few restrictions I have to impose as well, if I get to this point. I’m still not sure it will happen, but it’s helpful for me to make rules now.
- Keep the debt at a reasonable ratio compared to total credit lines. Between my two cards, I current have $7,500 in credit. When the balance between them equals $2,250, it will start to adversely affect my credit. $3750, or half of my available credit, is the upper limit.
- Use the lower-rate card. This seems like a no-brainer, but I might be tempted to put things on my Amazon card, which gives me points toward Amazon.com gift certificates. That’s a big no-no: the higher APR on that card (12.24% vs. 9.24% on my Bank of America card) cancels out the rewards I would earn. Unless my rates drastically change, the Amazon card is only for purchases that I pay off every month.
- Pay twice the minimum payment. If I can’t afford to do that, it’s a big signal that I’ve charged too much.
The idea of this whole thing is simply to bridge the gap before my income rises – to make ends meet while I do internships or entry-level jobs. I’m hoping it never gets to this… but I feel better going into it with a set of guidelines, first.