How to Quickly Pay Off Your Student Loans

Student loans are a menace to the financial health of young adults all across the country. Many young borrowers are at a loss as to how to meaningfully chip away at their debt, and so they just give up, accepting a life of making minimum payments for the next 30 years or so. Whatever you do, don't take this route. Student loans do not have to be a semi-permanent feature in your adult life, and I promise by following the advice below you will be able to eliminate your debt in much less than 30 years.To pay your loans off quickly here are some things you can do:

1) COMMIT TO PAYING OFF LOANS ABOVE SCHEDULE. This is the first and most important step to debt reduction. That means no more thoughts like,"I'm going to be paying my loans forever!". Instead start thinking "When it comes to paying off my loans quickly, yes I can!".

2) THINK OF ALL THE BENEFITS TO PAYING OFF YOUR LOANS EARLY. Paying off your loans early leaves more money for retirement, for buying a home, for your kids (should decide to have some), for investing, and more money for giving. For more motivation read this STUDY on the impact of student loan debt on personal wealth.

3) DON'T LISTEN TO NAYSAYERS AND CRAZY SPENDERS. You may notice that some people have not come around to the wisdom of paying off loans early. This is fine, everyone becomes financially literate in their own time. Believe it or not, once upon a time I was a big spender. The key is to no longer keep up with the purchasing habits of crazy spenders.

4) DON'T LIVE ALONE. Unless you are lucky enough to find single living arrangements at the same price as a roommate situation don't live alone. Use the extra money you save by having a shared arrangement to pay extra on your loans. 

5) GET YOUR SPOUSE ON BOARD. If you are married and one or both of you have student debt make paying it off a priority. If only one of you has the debt it is not just that person's problem. It is taking money away from the entire household's pot of gold, and both partners in a secure marriage should be contributing to its elimination.

6) DON'T BEAT YOURSELF UP IF YOU MADE A FINANCIAL MISTAKE, AND DON'T DIG A BIGGER HOLE. Some people wakeup and realize " What the heck was I thinking paying $100,000 for a degree in art!", or "Why the heck did I choose to go to fancy private school A when I could have gone to reputable public school B for 1/3 of the price and ended up in the same job?" Don't beat yourself up when you realize you may have made a mistake. The past is the past. Now it's time to swallow your pride, admit you messed up, release any anger, and more forward in paying down your balance. Also, do not under any circumstance dig a bigger debt hole. If midway through a program you realize you picked an overly expensive school transfer. If after getting a bachelor's degree in a low paying field you think you made a mistake, don't try to fix it by buying a graduate degree in that same area. 

7) DEVELOP A BUDGET. Budgeting and tracking your spending helps you to see where your money is going, and more importantly not going...to paying down your loans. The more conscious you are of your expenditures the easier it is to control them.

8) PAY THE HIGHEST INTEREST RATE LOAN OFF FIRST. Mathematically it makes sense for you to pay your highest interest rate loans first, because this is the debt that is costing you the most. Some people advocate paying your smallest loan balance first, so you can get the psychological thrill of getting rid of a debt sooner. If you think you need that sort of motivation to keep paying down your loans, by all means use that strategy, if not, it's best to pay the highest interest rate first.

9) POSTPONE FANCY PURCHASES. Young adults are pressured into buying all sorts of fancy things, extravagant engagement rings, weddings, homes, new cars, and expensive vacations to name a few. Don't get caught in this trap. Pay your loans first, and buy fancy stuff later.

10) SURROUND YOURSELF WITH DEBT NINJAS. I once tried to encourage a group of friends to start an investment club, and they weren't interested. At first I was a little bummed, but in the end things worked out just fine because I was able to connect with like-minded people on the internet. On your journey it will be important to have the support of others, as you constantly fight the cultural tide of being told that debt is good and it's OK to live beyond your means.

If you managed to read through this whole post, there's a good chance you are on your way to financial freedom. Best of luck with your journey. I promise being debt free will feel much better than accumulating showy trinkets. 

"Sometimes it's better to spend one hour thinking about money than to spend a week working for it." ~unknown

"You will find there is more satisfaction in rational saving than in irrational spending." ~P.T. Barnum

Spring Cleaning Pt. 2: Finances

Spring is a time of year when folks feel inspired to tidy up, this can mean cleaning up the garden, window washing, or cleaning baseboards. I like to add finances into the mix so I have at least a yearly reminder to thoroughly check where things stand financially in our household. Since this coincides with tax time, it's rather convenient.

To conduct our spring money clean I take on four things:

1) A review of last year's budget. I check to see where our money went? Where it didn't go? And where I would like it to go?

2) A review of our financial goals. This year we added the financial goal to be completely mortgage free by age 40. To reach our goal we've been using the great LOAN CALCULATOR on Dave Ramsey's site. It allows you to calculate different accelerated  loan payment scenarios. It's a life saver for anyone who wants to get an accurate picture of what it'll take to get debt free in a certain timeframe.

3) Identification of new ways to save. So far I've identified a few ways we can save more money moving forward:

1. Switch our cell phone plan. Our current plan is super expensive and I'm sure we can save           money by switching. I'll post later on what new plan we decide to go with.

2. Reduce our food bill. Currently, the amount we spend on food is crazy. I'm working on learning more tasty recipes so I can feel less tempted to eat out, eating more vegetarian meals, and starting to grow a few foods in our backyard. Ultimately, I want to get our grocery bill down to $400 a month, or lower if possible, without sacrificing quality. If you have any great recipes you recommend, please leave them in the comments section.

3. Simplify our wardrobes. I'm working on simplifying our wardrobes and buying more of our clothing used. I've noticed there are a ton of clothes in our closet that we never wear, and I want to cut down on this. I think a part of the problem is that when you have a ton of clothes to choose from, you end up not wearing a lot of them.

4. Reduce our utility costs. Unfortunately, Baltimore has some of the highest utility costs in the nation, so it's pretty easy to rack up astronomical bills. We haven't been as vigilant as we can about keeping our bills down. To work on this we plan to swap out our inefficient light bulbs, stop washing the majority of clothes in warm/hot water, take shorter showers, use a rain barrel, and air dry our clothes as much as possible.

4) Identification of new ways to make money. In addition, to saving more money we'd also like to make more money. I've done some research and decided it makes sense for us to start investing in a few Vanguard index funds. We are also looking at saving towards buying a rental property.

Are you doing any spring financial cleaning?

"Your financial life is like a garden. If you tend a garden carefully, nourishing the flowers, pruning, and weeding, it's going to be a lot more beautiful than if you just water it half-heartedly now and then." ~Suze Orman