Here are the steps I took to becoming student loan debt free.
First I prepared myself for the self-discipline. Just like with anything, whether it’s losing weight, or finishing school, paying off debt is a goal that you must prepare yourself mentally.
List debts, biggest to smallest.
I listed out my debts in order from highest interest rate to lowest interest rate, and then took into account the total amount owed on each. I chose to focus on the loans that were bigger first, because interest means extra money paid in the long run. Listing out all my loans helped me figure out what I was up against, and how I was truly going to tackle this and achieve my goal. This method helped me stay on track, without consolidating my loans.
Figure out what you can afford.
Knowing your monthly income is really important. In my case, what helped me better prepare myself was creating an Excel Spreadsheet. It had formulas to calculate how much I pay on monthly bills, versus what my monthly income was, in addition to allowing me to see how much I had left to either put towards my loan or use for “Fun Money.”
Create a budget and emergency savings.
Before diving into your debt free goal, take a look at your last month’s expenses. Create categories, set limits within those categories. List out your income, along with the amount that remains after all important bills are paid, so that you don’t exceed your income on month to month basis.
Emergencies happen and, looking back, I wish I had been more prepared. Before paying off your debt, or even in the midst of paying off your debt, build a small emergency savings account. This will ensure that unexpected emergencies don’t affect your ultimate goal.
Listing loans from highest to lowest and watching them slowly disappear, helps with being able to stick to your plan/goal. This helped me feel accomplished and encouraged me to take on the next one until every loan was fully paid off.
Paying off a debt doesn’t have to be an uncomfortable chore. Make the experience of paying off your debt a fun one. Think of the experience like a game. Every time you hit a milestone, reward yourself along the way. Do something to celebrate. Celebrating your success will help encourage you to keep moving forward and appreciate the progress you’ve made along the way.
Once you have these key points established, then it’s just fulfilling the obligation you have in place until you reach your goal.
Not let's get down to the nitty gritty. . .
I honestly can’t recall how much my loan payments were exactly. I will say this, the payments were manageable, and no more than $120/month for the nine separate loans I had out.
When it came to making payments, I choose to pay on them monthly instead of bi-weekly. Paying on them monthly was easier for me, so that I could be sure that I paid my other bills first.
I gave myself a 12 month deadline on a $25,000 loan and made sure I stuck to it. Unfortunately, I ended up paying my loan off in 13 months instead, due to an emergency situation. Which is why I recommend setting up that emergency savings.
With all nine loans from the same company, I ended up owing $25,000 worth of debt.
On the flip side, I didn’t have much of a social life because I was so determined that nothing derail me from my ultimate goal. Looking back, I am aware that I deprived myself of a lot of experiences with friends and family. However, my logic behind what I did was to stick to the budget. The allowance I gave myself only gave me enough wiggle room to go out twice out of the month. Looking back, I wish I’d set better balance. It’s important to focus on both the “now” and the future.
At one point in time I thought about consolidating my loans, for the simple fact that it would be easier to make payments. However, I changed my mind because I knew it wouldn’t be long until I paid the loans off . Plus, my credit to debt ratio on my credit report was high, so it was easier for me to leave the loans separated instead of one lump sum. Knocking off the debt, loan by loan, while working on other debts too, helped lowered my credit to debt ratio. This option was a personal choice, mainly set as a way to help me get approved for a future car loan.
Remember, keeping track of balances and interest rates was easy. Everything you can possibly need to manage your personal account was accessible on the online account. Just like a personal credit line, you can find out when the closing date is and when the next cycle begins. When it came to my last payment, I avoided the interest because I was very aware of the end of the closing date/billing cycle.
The advice I would like to give is to enjoy life while working towards being debt free. I didn’t treat myself when it came to accomplishing huge milestones with my loans. Sometimes I dreaded paying my loans each month, and even wanted to extend my goal a few times. There was just something in the back of my mind telling me,” I can do this and to keep at it.” When people ask me how I did it, I tell them the truth. This wasn’t easy. It was important though, and I’m proud I accomplished my goal. Just don’t forget to enjoy the little things while obtaining your ultimate goal.
Images: curtsy of Google.