Yes…you read that correctly. My student loans are completely paid off five years after graduation! For a girl who literally feels anxious just looking at numbers, this was a huge accomplishment. I’m no financial wizard…in fact, I could have paid my loans off even sooner if I had been more disciplined. But today I’m sharing with you what I DO know: that if I can pay off my loans, you can too! These are the main steps I took to achieve this goal!
Live below your means:
One of the basics of financial planning is that you should be living off about 80% of what you take home. For me, 10% gets tithed to my church, and another 10% goes to savings. The remaining 80% is used to pay expenses. I used Dave Ramsey’s Baby Steps as a guide. Once I had saved up $1,000 for emergencies, I stopped saving and started putting that 10% toward debt. I have never skipped tithing a paycheck since Andrew and I have been married, and the Lord has always been faithful to provide. Having an emergency fund in savings ensures that if unforeseen expenses arise, you won’t have to go into credit card debt to cover those expenses.
Set a monthly budget:
I’ve found over the years that the best way to track my budget is by month rather than by paycheck. If I try to track it further than that, I get overwhelmed. But if I track it paycheck by paycheck, it doesn’t give me an accurate view of how far each paycheck needs to go. My natural tendency is to look at the balance in my bank account and think that all of it is spending money. (Yes, I realize that is idiotic but that’s just what we’re dealing with here.) To avoid overspending, I check in with my budget weekly. I am much more careful with my spending when I see each transaction coming out of my account versus going weeks without looking at my finances and then being shocked at my balance. I also save non-essential spending (anything I want but don’t need) for the end of the month so I can be sure everything has been paid. I personally don’t use the Dave Ramsey cash envelope system for two reasons: 1) I keep up with my banking better by being able to see every charge recorded online. 2) Heaven forbid if my wallet is stolen, I can cancel my debit card. I can’t replace all my cash.
Learn financial discipline:
This is the big one, and unfortunately no blog post can make you change your spending habits. I woke up at the beginning of 2018 and realized I was so tired of paying on a student loan for a degree that wasn’t giving me much return on investment. Don’t get me wrong, I loved college and I’m so glad I went. But in the five years since I graduated, I have not once gotten a job that required a bachelor’s degree. It just didn’t make sense for a large portion of my income to go toward something that wasn’t reaping me tangible benefits. That was the fire I needed to set a goal of paying my loan off within the year.
To make that happen, I took on a second part-time job and dedicated 100% of my income from that job to my loan. I realize that is not practical for most people, but bear in mind that prior to this I had a three-day-a-week part-time job. So if you have a full time job, you are definitely making more money than I was with both jobs combined. To make my income go farther toward debt, Andrew paid all fixed expenses (rent, bills, car insurance, etc.) out of his income. When he lost his job through the military, this got tricky, but we just kept doing our best. Each month, I would budget extra tight for each category, and then at the end of the month, I took everything left and put it toward my student loan. This was in addition to my regular monthly payments. There were months that were more difficult than others, but by staying consistent, I ended up paying off my loan over the course of 2018!
The biggest piece of advice I can give is that if you want to pay off a debt bad enough, you will sacrifice other things in order to do it. We canceled our cable. I didn’t buy clothes all year except with my Christmas money, after I already knew I would meet my goal. I didn’t buy any home decor. We didn’t go to the movies or do any major traveling. If there was something I wanted, I asked myself if I was willing to subtract that amount from what I would pay to my loan that month. The thought of having that loan paid off was so much more rewarding than buying whatever I wanted in that moment. I also worked my butt off, many times working six days a week juggling two jobs to make extra income. If you are a two-income household, see if you can possibly live off one income for a period of time and use the other income to pay entirely toward debt. That season of living small will be so worth it if you can eliminate some of your debt.
Obviously if you have children, this will look different for you. You can’t just not buy your kids clothes for a year. If you don’t have kids yet I would really encourage you to buckle down on debt before they arrive, because the expenses that come with kids are unavoidable.
Keep in mind that we are not a debt-free household. With Andrew’s salary loss last year and me working part time jobs, we definitely incurred debt for his education. But that didn’t discourage me from knocking out my education debt, and it motivated us to avoid any additional debt from credit cards. I’m going to stop there before this gets any longer. I know this post was really general, so let me know if you have any specific questions! The moral of the story is: with discipline you really can reach tough financial goals and come out celebrating on the other side!