I fully paid off $77,000 ($76,524.22 to be exact) in student loans! If you want to skip to how I paid it off, scroll to the bottom =)
What a weight off my shoulders. One of my many money moron mistakes I made in my 20s can finally be put in the past.
I went to an out of state college and I never worked part time. I used my leftover student loans on….stuff. After graduating from college, I defaulted on my student loans and instead lived paycheck to paycheck even when I started making 6 figures. What did I spend it on? Materialistic things including leasing a sports coupe during the recession AND even after my credit score tanked well below 600. Imagine the sky high money factor (this is the lease term for APR).
What was the wake up call? Just several years ago, I received a letter for the first time from the US Department of Education saying that they have the power to garnish wages.
This scared the sht out of me. I was running through the scenario of my manager, my team, and my colleagues finding out that the government was taking X% from my pay because I defaulted on my student loans. I also started thinking about what happened if I applied for another job and they ran a credit check only to see not only the defaulted loans but some note that said my wages were being garnished.
This was the moment I started to pay off my student loans more diligently and increasing my minimum monthly payments.
Fast forward a couple years and in May 2018, I randomly started listening to some financial and personal investing podcasts and I could not stop listening. There were a series of episodes in which regular people were sharing their debt pay off stories. What put things into perspective for me was that many of these people were making far less what I was making yet paying off varying amounts in debt (student loans, credit cards, car loans, hospital bills, etc). I thought to myself, if these people can pay off their debt, then why not me. It motivated me.
This is where you can somewhat see how I started paying a minimum $2,000 a month, which was well above my required minimum monthly payments, and in some cases paying multiple times per month.
As I was getting closer to paying off my student loans, I noticed a significant jump in my FICO credit score. My loans were paid off in February 2019, but the jump started in December 2018.
Here are the 5 ways I paid off my student loans (no specific order)
1. I started a budget….a very simple, I-don’t-want-to-spend-more-than-5-minutes-per-month budget
I was always too lazy to keep up a budget because I always thought using excel was the way to go. So I never went back. In May 2018 when that lightbulb finally went on, I discovered a mobile app that allowed me to input my estimates. I am not a fan of connecting accounts to apps so I knew I had to find alternative solutions. I used the the free Everydollar app. I simply input my monthly estimates and that helped me keep up the budget every month. One of my strengths is self awareness so I knew that if I was going to keep track of literally every dollar of my paycheck, then I would start hating myself.
2. I started to take side hustles more seriously to bring more income
My biggest passion has been buying and selling sports cards, so I knew this was going to be the biggest opportunity for me to increase my side income. I started to shift from mostly collecting/holding to buying/selling aka flipping. I also started going to thrift stores mostly because it was a surprisingly fun way to hang out with my parents while looking for things to buy and sell. Luckily it was a win win….quality time my parents while working together to flip for profit.
I started to do some consulting work around digital marketing, which is my full time job, and credit card marketing and that helped pad the extra income.
3. I decreased my retirement contributions
For 1.5 months (or 3 paychecks) I eliminated retirement contributions including not getting my company match. This is really bad advice that I received. Always contribute to get your full company match. Company match is as close to free money as you can get. After a few paychecks of missing out on the company match, I increased my retirement contributions to the minimum to get the full company match and then put the rest towards my student loan debt.
4. I continued to live comfortably, not insanely frugally
I do not believe in making your life so miserable that you have to live this insane frugal life. I live a fairly minimalist lifestyle and I do pay for convenience. I continued to drive to work and pay the monthly garage fee rather than take the train, I continued to each out for lunch at work, I continued to enjoy moments with family including taking my brother to the World Series, and I continued to reinvest in the hobby I enjoy to make more money.
I never in my life set any debt payoff goal. That sounded dumb. Well it is true what they say. If you write your goals down, the more likely it will come true. I think it is because it keeps you accountable for achieving that goal and to remind you to not get distracted and forget. I would constantly look at an amortization chart so I can visualize the end student loan debt payoff goal.
I will write a follow up to share my experiences of what I felt the day my loans were finally paid off and what has happened since.