We had a combined student loan debt north of $34,000 when we got engaged. As daunting as this was, we were determined to eliminate the albatross that was our loan as soon as possible. It wasn’t easy, but it was completely worth it. In just under a year, we paid off the debt in full. We made the short-term sacrifice for a long-term payoff, and here’s how we did it.
1. Decide to act.
This is the first and most important step in beginning to dismantle your debt. The thought of paying this off in 10 or 20 years has become a nightmare, and now you’re committed to gifting yourself freedom. You’re deciding to go on the attack on behalf of your finances and your life. You’re the aggressor. You’re going to optimize every extra dollar you have. If all you do is talk about maybe paying them off someday, well, someday will never come. We stopped talking and started doing.
2. Get on the same page.
Whether you’re single or you have a significant other, you have to be on the same page, with a laser focus, while paying off debt. Without this, only more frustration will build as you try to make payments and meet certain goals. How much will you pay each month? When is the desired end date? What will you do with all your extra cash once you pay off the debt? What are acceptable and unacceptable purchases? By remaining disciplined to your standards and working together as teammates, you significantly increase your chances at crushing this thing. We believe this may be easier for a single person who can practice great self-discipline. Sometimes getting a significant other on board can feel impossible. Jake was resistant at first, but with a little push, he quickly became more enthusiastic about the journey.
3. Cut out the fluff.
A monthly budget is in order. Each line item should have a dollar amount associated with it prior to the month beginning. Knowing how much you’re spending on everything from gasoline to grapes, mortgages to movies, or insurance to iPhones will significantly increase your impact. Notice the places where you can cut back. What ‘needs’ can you turn into wants? By trimming down your monthly expenses, you ultimately free up more cash to throw at your albatross. We ended up having hundreds of more dollars to allocate to our debt by cutting out all the extras which would’ve held us back. Cable? Gone. Shopping? Never heard of it. Gym membership? We can workout anywhere. This is no time to be a spendthrift. Need help tracking your spending? There are plenty of free online sources and apps to track how much you spend in every category life has to offer. We used EveryDollar during our debt elimination phase. We now use Mint to track our finances, which is another great resource.
4. Make the maximum payment.
The idea of the minimum payment is to keep your loan around long enough for it to be profitable for the lender, aka, interest accumulation. Minimum payments should offend you. These are deceptive little lies designed to take advantage of us–to take more of our money. In our crazed-like state of paying off our loans, we paid an average close to $3,300 per month. Our minimum would’ve been roughly $300. We increased our minimum monthly payments by more than twelvefold. We also threw any bonuses, tax returns, or other windfalls of cash straight to the debt. Even though this stings every. single. time. you’ll see your debt number begin to drop like an anchor. The momentum will build. You’ll gain traction like never before. And even better, you’ll begin to believe.
5. Keep your emergency fund low.
This is going to be essential to paying off the debt. You need a fund for those times when the car needs oil or when the co-pay at the doctor is due. You won’t be growing this account while paying off the student loan. Only replenish the emergency fund when you dip into it for an unexpected cost. We kept our fund around $1000 during the debt destroying timeframe. Some people will need a little more based on life circumstances. The key here is to find the bare bones minimum you can keep in there to survive, and use the rest to kill the debt.
6. Celebrate victories.
In order to make this process palatable, you must celebrate the little wins. As you begin to gain momentum and you see $1,000 or $10,000 worth of debt disappear, get pumped! You’re one step closer to freedom. For us, we’d go out to Chipotle (our favorite fast-casual restaurant). This was affordable and usually budgeted into our expenses. But man, nothing says accomplishment better than a Burrito Bowl covered in chicken and Tomatillo Red-Chili Salsa.
7. Crush Your Student Loan.
At the end of it all, the final step is to make the final payment. Close the chapter on this stage of your life and move on. Ironically enough, right before our last payment posted, a little more interest accrued and we owed .29 cents. Our final payment on a loan that was ten of thousands of dollars came down to just a mere .29 cents. And we paid it. This felt like a metaphor for something. It was laughable. .29 cents? Anyone can afford that. We look back on all the debt we paid down and realize it was so possible all along. All we had to do was decide to act. You can’t pay the final .29 cents until you’ve paid the first.