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

Worth Your Money: Ting

One of my most recent mini money goals has been to reduce our monthly telephone costs. Normally we spend around $150 a month for our cell phones through Sprint, and after thinking about it, this seemed a bit ridiculous to me. In my hunt for possible money saving solutions I came across a lovely company called TING.

Ting allows Sprint users to switch to their services free of charge, and charges a reoccurring monthly fee based upon your usage. There is no sign-up fee and no contract commitment. You can start with a plan as low as $3/month for up to 100 minutes. See all their plans HERE. What differentiates Ting from other companies is that they do not offer subsidized phones, so you have to pay out of pocket if you want a new one. By not subsidizing phones they can offer bare bones monthly rates. This works out great for a person like me who plans to use my existing phone until it dies, and then buy a used one whenever it needs to be replaced. So far, in our two months with Ting we've spent an average of $64 total for two phones, a savings of $86 a month or over $1,000 a year. Heck yeah, mission accomplished! If you would like to switch to Ting, use this LINK to sign up online and you'll receive $25 off your first bill.

“If you can, you will quickly find that the greatest rate of return you will earn is on your own personal spending.” ~Mark Cuban

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

Money Tip: Never Take Financial Advice From Broke People

Has anyone else ever noticed how quick broke people are to give financial advice? They love to tell you how you should spend ridiculous amounts of money on jewelry, vacations, clothes, new cars, education, and handbags. Oh and housing, don't get me started on housing, according to them you need to live in a better neighborhood and waaaay bigger house. Those broke people, I tell ya, they are an opinionated bunch and love spending not only their money, but the bank's money, and your money too!

I am here to tell you it is a very bad idea to listen to broke people when it comes to money, after all they are broke for a reason. Often times that reason is connected to their overspending and lack of saving. If you are not careful it can be easy to get caught up in their whirlwind of poor financial values and behavior. Being financially irresponsible appears to have become an epidemic in America, recent data from the Fed finds the average U.S. household owes $7,115 on their credit cards; looking only at indebted households, the average outstanding balance rises to $15,252. Furthermore, a whopping 40 percent of households spend more money than they make.  These statistics suggest there is a big chasm present between the big spenders and the big savers.

So how can you ensure you end up on the right financial team? I can help with that. From time to time I'll post nuggets of financial wisdom to help you stay on track. Lesson #1: never take financial advice from broke people. Always look to individuals with an economic standing you'd like to adopt for advice.

That's all for today. Have you had an experience with being pressured to overspend? Are you currently working to get your finances in order? I'd love to here from you.

***Please note by "broke people" I am referring to individuals who make a decent wage, yet spend it unwisely***

"If your friends that are broke aren’t making fun of you, then you are not on track. If your family says, “Look, they’ve joined a cult!” then you are right on track." 

~Dave Ramsey

Ways to Save Money This Year

This time of year brings about all sorts of resolutions and promises to improve our lives. Often times these resolutions involve finances, so I thought I'd do a post about how to save money. Here are a few of my suggested tips:

1) Pay your mortgage bi-weekly. One easy way to save thousands of dollars is to pay your mortgage bi-weekly instead of once a month. For each payment simply divide your monthly payment by two. This will save you a TON on interest charges throughout the life of your loan. Use this calculator to find out just how much you will save.

2) Stop borrowing money. My motto is "Own not loan". In other words if you can't afford to pay for it in cash, you can't afford it. This includes a car. The only exception to this rule is a house (sidenote: your home should never cost more than two times your annual after tax household income) and certain educational expenses (i.e. those that result in increased pay equal to or greater than the cost of your education). Say goodbye to credit cards, cut them up right now, they are useless, unless of course you are a bank.

3) Cook more. Eating out a lot can seriously suck up your dough.

4) Buy used.  Buying used is the ish. It saves me hella money. I buy all sorts of used stuff...cars, purses, furniture, cooking gear, books, household equipment. Ebay, Craigslist (especially the free section), Etsy, garage sales, thrift and consignment stores are all your friends. They will save you BIG time.

5) Stop being lazy (I am sooo guilty of this). People spend tons of money on  gym memberships because they think it is necessary to stay fit. This is simply not true. How do you think people stayed skinny 100 years ago? I'll give you a clue it wasn't because of the gym. There all sorts of free ways to stay in shape....do your own yard work (and your neighbors if they can't do their own), walk your dog (or someone else's if you don't have one), play with your kids more, go for a jog, have more nookie, do yoga at home (there are free videos on youtube), run up and down your stairs, use free weights.

6) Reduce your entertainment expenses. The library, parks,  Baltimore Museum of Art, Walters Museum, and The Book Thing are all FREE. You can also save money by hosting dinner parties or potlucks instead going out for fancy dinners and drinks.

"Whatever your income, always live below your means. Good health, longevity, happiness, a loving family, self-reliance, fine friends....if you have five you're a rich man." ~Thomas J. Stanley, Millionaire Next Door