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Disclaimer: I am NOT a financial expert. Everything written here is my own personal experience. I am not attempting to be a financial advisor nor is this a blueprint to follow. This post is meant to be an example of how to pay off debt.
Are you tired of owing money? Are you tired of INTEREST?!
I feel like that All. The. Time.
It’s the worst feeling knowing you owe someone money and that if you don’t pay it off quickly, you’ll owe that person even MORE money! And that’s YOUR money!
Recently, I paid off my student loan totaling $19,000. And I did it in six months. SIX months!
And I’m here to tell you, so can you.
With some determination, will-power, patience, and lots of discipline, you can pay off your debt quickly. And by quickly, I mean cutting your loan term (time in which you have to pay off the loan) way down. Paying off a loan isn’t an over-night deal, it takes time to figure out how much money you can set aside each month to put towards it as well as actually executing your plan. I can’t count the number of times I wrote down a plan and it changed. That’s going to happen frequently and being patient is going to be key in the process.
Each month, I would set aside the money needed for my monthly expenses (charitable donation, utilities, rent, groceries, insurances, etc…) and then see how much money I had left over in my checking account. After I had enough money to live on until the next pay check, I would take any extra money I could live without and put into a separate account (I named mine “Pay Off Debt”). That way I know not to touch that account and that it is strictly for the purpose of paying off any and all debt.
I knew that putting aside money from each paycheck wasn’t going to help me reach my goal of paying off my student loan and that I had to come up with another idea to help me get it paid off faster.
So I came up with ways I could earn some extra money to throw onto my loan! Check these ideas out here!
I knew that if I could make some extra money and put it towards my debt, the amount I owed would definitely go down at a faster rate and since that extra money would be put onto my loan so fast, I wouldn’t even miss not having the extra money I made because it wasn’t coming out of my paychecks!
A big way I would earn extra money was to pick up extra shifts of work at other offices. I’m a dental hygienist so it’s nice because I can work practically anywhere! So it’s pretty nice to get an extra couple hundred dollars from working at another office and being able to throw that onto my loan.
I know not every job pays well, but it is possible to pay off debt with even small amounts of money! You just have to be consistent and diligent about your plan!
So how my plan all started:
When I first started college, I got a scholarship, university grants, and yes, I took out loans. I didn’t plan on working throughout my college career because I needed the time to focus on my grades so I could get into the dental hygiene program (it’s VERY competitive).
My scholarship covered all four years’ tuition to get my Bachelor’s degree, however, I didn’t receive university grants every year. If I remember correctly, I got them my first two years of college and not the last two due to lack of funds (yeah right…). When I did get grants, they were only about a couple hundred dollars – enough to cover the cost of books in college. But every year, I took out all the subsidized loans I could get so I could pay rent, groceries, utilities, you name it.
My first semester of sophomore year in college, I decided to get an on-campus job. I worked in the scholarships and admissions office for a few months, didn’t make much money working there, and then decided to move back home for the second semester. I was able to save SO much more money living at home and doing online classes. I would wake up to work out (sometimes at 4:30 AM), go work for a dentist/part-time nanny for his wife, come home and do my homework, go to sleep, and repeat the next day. It was an exhausting semester, BUT I was able to save up enough money to buy a car!
So now I had student loans to pay off AND a car loan.
I shopped around for awhile and finally got a used 2010 Toyota Corolla for $8,500. I knew I didn’t want to be paying off my car for the next six years, so I decided I was going to do whatever I could to pay it off quickly. But for the next year and a half, I was paying the minimum monthly payment since I couldn’t afford anything higher at the time. It wasn’t until I got a job my senior year of college cleaning AirBnBs, VRBOs, and houses that I had some extra cash I could throw onto the car loan. I would get paid monthly for this job and would make usually around $300 every month ($500 on a busy month). My minimum monthly payment for my car loan was around $130, so paying about double the amount was a great start! My husband and I started picking up side jobs that would make us a little extra money and we would throw it all towards our car. Soon, we were able to pay off our car in half the time it was originally scheduled for.
But of course, once one debt is paid, another starts right?
Shortly after paying off our car, it was about time to start making monthly payments on my student loan. Because I chose subsidized loans in school, they didn’t begin accruing interest until six months after I graduated college. I graduated college in May 2018 and my student loan began building interest in December 2018.
So my monthly payment became close to $195. I quickly started thinking of ways I could make extra money to throw onto my $19,000 loan. I really had $12,000 to pay off because I had put the loan money I never ended up using during college into two money market accounts through my bank to build a couple dollars over the years I had my loan. So I began using that $7,000 of unused loan money I had saved in the bank to start making the monthly payments towards my loan.
And then it became that time of year where we receive our tax returns. We were able to get about $5,000 back this year, which was all going toward my loan. So at this point, I only needed $7,000 left to pay off! My next plan was to use the reimbursement check for my labor and delivery (~$6,000) towards my loan and be close to being done! We decided to use some of it for a trip out of the country and because of that, ended up putting about $3,000 towards my loan. And with that, I only had $4,000 left.
I was determined to pay it off ASAP.
With each paycheck from work, I was able to throw anywhere from $500 to $1,000 towards my student loan and a few months later, had my student loan completely paid off with only having to pay about $400 instead of $4,000 in interest if I had kept making my monthly payments for years and years.
The reason why I am telling you the process in which I paid off my loan is not to discourage or rub it in anyone’s face. I am very proud that I was able to accomplish my financial goal of paying off my student loan a year after graduating college and I worked very hard to do so. The point I’m trying to get across is that if you make a plan and stick to it, you definitely can reach your financial goals!
It’s going to be important to set aside time to come up with a plan. Write out your financial goals and then make a plan as to how you’re going to execute that plan. Stick to it and find ways in which you can throw any spare or extra cash you have lying around or that you earned and get rid of that debt!
Dave Ramsey’s Total Money Makeover definitely helped A TON. He talks about the debt snowball and how to tackle your debts with the highest interest first so you don’t end up paying more than you started out with. He then says what I have been saying – throw any extra money you can towards debt! Just get rid of it! Like I said at the beginning, no one likes owing someone else something, especially money!
The above example is to show how quickly debt can be paid off, as well as how long it can take. If I had continued paying the minimum monthly payment on my student loan, it would have taken me at least 10 years to have paid off my loan fully and I would have paid at least $4,000 in interest!
The #1 reason I was able to pay off my student debt was because I used the extra money we made from everything (side jobs, extra shifts, tax return, reimbursements, etc…) to put towards my loan. Without Spencer and I being on board and having that plan, we would have been stuck paying the minimum monthly payment on my student loan probably until the time Spencer finished school (which is about another 7-8 years) and maybe even still some! So I cannot stress enough how important it is to make a plan of how you’re going to bring in some extra cash to throw at the debt! It will definitely be a life changer!
If I can do it, YOU CAN DO IT!
So what is your plan? How are you going to control your money so you can get out of debt?!