It finally happened. On Tuesday, October 17, 2017, I made my last student loan payment. All told, it took me three years, three months, two weeks, and six days to pay them all off. Not that I was counting or anything.
So what was the total damage? Here’s a breakdown of my loans and the total amounts paid, including interest. Of note, I don’t have exact figures for the two private loans because I paid them off before I started blogging.
- Private Loan #1: about $35,000
- Private Loan #2: about $60,000
- Federal Loans: $319,342.47
- Total: $414,342.47 (more or less)
Yikes! That’s a lot of money! Pretty crazy that I was able to pay that back in just over three years.
Not Another “How to Get Out of Student Loan Debt” Story
Don’t worry. This isn’t another “I paid off over $400,000 of student loans in three years and you can too!” post. Truth be told, we all have different financial situations. Different incomes, expenses, and amount of debt. For instance, I have the benefit of a high income household while others may not. What worked for me may not be applicable to you.
Despite all of these differences, however, there is one universal thing that will help you get out of debt quicker. Are you ready to have your mind blown?
Pay more than the minimum.
Mind boggling, isn’t it? Yes, the more you pay towards your debt, the quicker it will go away. While that might sound simple enough on paper, in reality it’s much more complicated than that. There are a lot of factors that come into play when trying to pay off your debt. As I mentioned earlier, everyone will have different incomes, fixed expenses, and liabilities.
That being said, here are some other core concepts that I think can be useful for anyone trying to pay off their debt.
Budget, Budget, Budget
This is the first thing that anyone who is paying off debt should do. Yes, budgeting is a chore and a pain in the ass. But it’s the only way to figure out how much you’re spending, and where you can cut back to free up some cash.
There are a lot of budgeting apps and software programs out there that you can use, such as Mint. You can also go old school and use Excel to create a spreadsheet. Whichever method you choose, the goal is to get your monthly income and expenses in front of you. That way you can figure out where you can cut back in order to free up some cash.
As I mentioned before, the size of your payments will dictate how quickly you can pay off your debt. Think of it this way. Imagine your debt as a big pile of crap and your payments as a shovel. The bigger the shovel, the faster you can get rid of said pile of crap.
Here’s a helpful equation to keep in mind: Income – Expenses = Shovel
So, in order to increase the size of your shovel, you would need to increase your income and/or decrease your expenses.
Ways to increase your income:
- Work more, either through overtime or a second job
- Negotiate a pay raise
- Earn some extra income through a side hustle
- Declutter and sell some stuff on eBay or Craigslist
Ways to lower your expenses:
- Cook your own meals and don’t eat out
- Cut the cord and get rid of cable
- Shop for a cheaper cellphone plan
- Get rid of all unnecessary subscriptions and/or memberships (i.e. gym, magazine, Netflix)
Live Below Your Means
This concept doesn’t require much of an explanation. Want a sure-fire way to stay in debt? Live above your means and buy things you can’t afford. Want to get out of debt? Then live like you’re broke.
Pick a Debt Payoff Strategy That Works For You
- Debt Snowball – pay off the smallest debt first, then work your way up based on balance of debt
- Debt Avalanche – pay off the debt with the highest interest first, then work your way down based on the interest rate
The snowball method works based on psychology. By paying off smaller debts first, you generate momentum and motivation to keep moving forward. After all, it does feel great when you pay off a loan in full.
The avalanche method, on the other hand, is all about math. By paying off high interest debt first, you end up paying less in terms of interest.
There is no right way or wrong way to pay off debt. The key is to pick a strategy that works for you, and one that you can stick with until the end.
Don’t Take On Any More Debt
For instance, it doesn’t make sense to be paying extra towards your student loans while simultaneously taking on new credit card debt. That’s like trying to bail out water from a boat that has sprung multiple leaks. You’re doing a lot of work but getting nowhere fast. First you’ve got to plug those holes, then bail away.
One Step Closer, But We’re Not Finished Yet
Paying of my loans was a grind. It was a marathon, and I had a little bit of debt fatigue (topic for a future post) along the way. To be honest, I felt like this day would never come. But it has, and it sure feels great to say that I no longer have any student loans. And with this debt out of the way, we are one step closer to our goal of financial independence.
Now… what to do about that pesky mortgage?
Readers, what are some of your thoughts on debt? Any debt payoff stories? Tips for getting out of debt? Let me know in the comments below!
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