This is a topic that many of us as adults struggle with on a regular basis. Some of us find ourselves in debt from when we graduated college, like myself, and some of us find ourselves in debt from credit cards, personal loans, cars, etc… Regardless, debt is debt! It doesn’t matter how you got there, what matters is finding freedom from all of that debt.
I graduated from college in May of 2013, six years after I had originally started…but boy, was I super excited to finally be done with school! To hold that degree in my hand… yippee!
Fast forward 5 months to when I started receiving all those letters in the mail stating that my loans were finally maturing, I realized it was time to get my act together and formulate a plan of action. At the time, I had no idea how much I actually had in school debt, but I’d say I had a general idea…WRONG.
After, I got all my letters, the total amount I owed after triple checking was a whopping $72,324.34!!! *insert sigh here*
Here is a breakdown of my loans…
Wells Fargo – $22,127.40 (principal $17k + interest over 5 years) – 10% interest rate, but I received .75% in deductions like auto draft and graduation, so it came down to 9.25%
My Great Lakes – $26,501.94 total for 6 loans @ an average of 5% interest
CAL Loans – $23,695 total for 3 loans @ 5.25% interest for each loan
This made me cry, honestly. I was SO overwhelmed. I had no idea how I was ever going to pay it off. The one thing that got to me was the Wells Fargo Letter that said…”If you pay $227.73 every month for the next 15 years, you will have paid off your original Principal balance of $17,000 and a total of $18,864.63 in interest over the life of the loan.” I almost threw up. To have paid more in interest than what I essentially took out as the original principal amount was disgusting.
BUT, I found an incredible amount of inspiration from other people who had shared their stories. I watched Youtube videos, read blogs, searched all sorts of ways a person could pay off debt. This is what led me to pay off over $28,000 in TWO YEARS!
GET A GAME PLAN
For me, my game plan was to try and pay off my Wells Fargo loan ($22,127.40) first within 2 years. I sat down with my calculator and worked out how much extra I had to pay every month in order to achieve this goal. I was already making a payment of $227 a month, so in order to pay this off in 2 years I had to pay an extra $800 a month. Now, that sounds like a lot of money and it is, but you don’t have to put this much towards a loan every month…remember EVERY LITTLE BIT COUNTS. Some months were better than others in reaching this goal and some months I barely paid any extra.
YOU HAVE TO MAKE SOME SACRIFICES…
- LIVE WITH YOUR PARENTS – If you can live at home for a few years, DO IT! This will be the biggest way you can save your money! Rent for a one bedroom apartment where I live is roughly $1k, not including utilities! That’s a thousand dollars I could be putting towards my loans and that is EXACTLY what I did.
- NO RESTAURANTS/FAST FOOD – I hardly ever ate out. If I did, it was maybe 3 times a month and I never spent any money on alcohol at restaurants or bars.
- NO NEW SHOES/CLOTHES – I did not go shopping! I know, I know…some of you are probably like how in the world?? (you are probably also thinking that for the above statement too, haha) but if it wasn’t a necessity, I did not buy it.
- CAR TRADE IN – I traded in my 2008 Kia Sorento for a 2008 Honda Accord for a lower monthly payment and for better gas mileage. (I was driving a lot with all these jobs!)
Trust me, it is very hard to be this disciplined, but it REALLY paid off, literally, when I could visually see the numbers going down every month! It made me even more determined to stick with the “spending fast” I was on. I was only living off things I absolutely needed, which isn’t much when you think about it.
So for me as a dance teacher I was teaching full time at night from about 5pm-9pm Monday thru Thursday. I was also in a dance company that paid me for rehearsals on Friday nights and Saturday mornings (quite rare! but so thankful) and performances. However, I decided that I should probably get a full time day job if I was going to get serious about paying off these loans, so in December 2013, I accepted an Office Manager position! Also, I was babysitting almost every weekend, which I found all of my jobs on care.com. I worked A LOT.
I was so exhausted, but VERY determined.
TIP! You always want to start out by paying off the HIGHEST interest rate loan you have. This will save you TONS. So all that extra money I was making babysitting or rehearsing or teaching went to this loan ALONE.
In September of the following year, I changed to a better paying job and decided to take a break from teaching dance. I started nannying part time in the evenings. The trick I started using was to never include any EXTRA money I made as part of my main income. I solely used it to pay any extra money towards my loans. At this rate, I was putting in an extra $700-$1000 a month towards my Wells Fargo loan.
TIP! Because my Great Lakes and CAL loans were government loans, I had the option to chose a repayment plan based on my income. This lowered my other two monthly loan payments considerably! I suggest you do this so you can focus more money on the higher interest loan.
I did this for TWO straight years. YES, it was extremely exhausting physically and mentally to feel like I couldn’t spend money or have fun with my friends, but it was SO worth it and I definitely realized you don’t have to have the newest trendy clothes or the alcohol to have a wonderful time!
You can be as aggressive as you want to be. I owed a lot of money and I wanted it gone as soon as possible in order to save more in the long run. Form a game plan and try to stick with it as best you can!
On January 21, 2016 I officially and gladly paid off my Wells Fargo loan! I saved over $16,000 in just interest alone!! That is so insane to me! I am extremely proud of myself and so happy that I went for it and stayed on track. It is an absolute AMAZING feeling to know that I accomplished this goal by myself and if I can do it, you can do it too!
Here is an update as of May the progress of my loan total…
I hope that this helps all of you out there who need a little inspiration! What inspirations have you found and what ways have worked for you in reducing your debt??