According to government data out this quarter, student loan debt, which has doubled over the past 8 years, stood at $1.8 trillion as of June 30.
\nAbout 11.5 percent of student debt was delinquent or in default for at least 90 days in the quarter that ended in June, up from 11.1 percent in the previous three months.* This new data signals a potentially significant drag on economic growth and upward mobility for the U.S. middle class.<\/p>\n
Although there are plenty of reasons for the current debt cycle many American students now find themselves in, there is a solution to dig out of this hole over the long term: saving. That simple, timeless virtue of setting aside some of our money to guard against excess or unexpected circumstances is in need of a major comeback. It\u2019s important for those students piling on massive amounts of debt, and it\u2019s also important for the parents of college goers whose own saving habits could help forestall some of the financial burden heaped on their children.<\/p>\n
Islamic finance eschews debt in its classical sense, respecting the prophetic wisdom that equates debt to slavery. Faithful Muslims are encouraged to regularly ask God for protection from the burden of debt and from oppression by human beings.<\/p>\n
So how do we start to implement a savings regimen that will get us going in the right direction? Here\u2019s a four-step plan:<\/p>\n
1)\u00a0\u00a0 \u00a0Figure out how much you\u2019re currently spending<\/strong><\/p>\n Without knowing this key piece of information, it\u2019s challenging to create realistic saving goals, so invest a little time to figure out where your money\u2019s going. A typical budget might include categories like mortgage\/rent, food, loans, transportation, utilities, child care, and medical expenses. Some other spending categories that could make the cut are things like clothing and entertainment. Create categories that are right for you. In addition to the spending categories you\u2019ve identified, you\u2019ll want to add categories for saving.\u00a0 A category for retirement savings is a must. Plus, don\u2019t forget the emergency fund savings category. Azzad financial advisors recommend that you have at least six months of living expenses set aside in an account that is easily accessible. Other saving goals might include a new car fund, a travel fund, or a charitable giving fund.<\/p>\n 2)\u00a0\u00a0 \u00a0Decide how much you should save<\/strong><\/p>\n How much you allocate for each of your categories above will depend on what you\u2019ve determined you spend monthly (on average). For example, you\u2019ll want to be sure that you allocate enough every month for transportation to cover all related expenses (you may not be paying the car insurance every month, but you should still be setting aside enough money so that when it comes due, you won\u2019t feel the difference). Of course, if you\u2019re trying to lower your expenses and set aside more to save or to pay down debt, you\u2019ll want to take a hard look at these monthly expenses and see where you think you can realistically make cuts.<\/p>\n Also, make room for retirement savings, too. You\u2019ll want to transfer those savings into a tax-advantaged plan like an Azzad IRA in periodic installments.<\/p>\n 3)\u00a0\u00a0 \u00a0 Start to implement your budget<\/strong><\/p>\n There are several ways to make this happen. Two of the most popular are the envelope system and the savings account system.<\/p>\n Envelope System: If you are going to use the envelope system, you\u2019ll want to label a set of envelopes with each of your spending and savings categories and place money in them according to the amount that you\u2019ve budgeted every time you get paid.<\/p>\n Savings Account System: You might prefer to allocate all your categories into different accounts at a bank. Some banks allow you to have an unlimited number of accounts. So, whenever a paycheck comes in, you can divvy it up among them. You can also have this done automatically.<\/p>\n 4)\u00a0\u00a0 \u00a0Do what feels right<\/strong><\/p>\n Remember, there\u2019s no single way to budget. Everyone has different needs, and there is no one-size-fits-all solution. What\u2019s important is that you find what works for you. And don\u2019t forget that even though consumer debt is bad these days\u2014about $11.9 trillion, to be precise\u2014it\u2019s been worse. We\u2019re still about 6.5% below the record high reached in 2008.<\/p>\n Hope springs eternal.<\/p>\n * Source:\u00a0http:\/\/www.newyorkfed.org\/microeconomics\/hhdc.html#\/2015\/q2<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" According to government data out this quarter, student loan debt, which has doubled over the past 8 years, stood at $1.8 trillion as of June 30. About 11.5 percent of student debt was delinquent or in default for at least 90 days in the quarter that ended in June, up from 11.1 percent in the […]<\/p>\n","protected":false},"author":1,"featured_media":6,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[98],"tags":[173,95],"class_list":["post-3421","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-personal-finance","tag-budget","tag-personal-finance"],"yoast_head":"\n
\nTo accurately figure out your spending habits, try the following:<\/p>\n\n