So after my previous post about hitting a milestone in my loan repayments, I had a lot of people message me asking me what the secret or trick is…well unfortunately, there is no secret to paying them off quickly, but I do have a several tips that may be helpful. If I can do it, you can too! Here we go.
STEP ONE: Make a budget and stick to it!
Sit down and take a look at all your monthly expenses: minimum loan payments, car payments, gas, groceries, rent, going out money, etc. Anything and everything that you typically spend every month.
Now, look at your checking/saving account…do you have at least 3 months safety net if something were to happen to you?
If the answer is NO…then don’t pay extra towards your loans until you have a solid safety net.
If the answer is YES…figure out if it’s more than 3 months or exactly three months. When I sat down and looked at my numbers, I realized that I had too much money just sitting in my checking account for no reason, doing nothing! I know, I know, what a problem to have, but it’s a stupid problem and will cause me to have to pay my loans off longer. If you fall into this category take that extra chunk money that is beyond the safety net and put it towards your loans.
STEP TWO: Organize your loans!
Make a spreadsheet of ALL your loans listed from greatest interest rate to lowest interest rate. In the spreadsheet, also, put the minimum payments down so you have everything all in one list. See the loan at the top of the list? That is where ALL you focus will go when paying extra towards your loans. Do not deviate to another loan until the highest interest loan is gone.
STEP THREE: Where does this extra money come from?
Unfortunately, student loans are not proportional to the amount you get paid(unless you are on a special income-based repayment plan). Because of this, most of us aren’t just sitting on extra money to throw towards the loans each month. Hmm…so what to do??
GET ANOTHER JOB. We are young, we are resilient, we have more energy now than we will in ten or twenty years. Take advantage of that. I have one to two additional jobs beyond my full-time 40 hour work week. I work my butt off and I am always looking for more work to do.
Do I want to go home after work and eat dinner and go to bed? YES
Do I want to pay off my loans faster than the 25 years on minimal repayments? YES
Which one do you want more?
For me, paying off my loans is my NUMBER ONE financial goal. I am NOT a financial adviser and I do not claim to be an expert, but this simple three step equation is helping ME pay off this massive amount at a much faster rate…so something must be working 🙂
Every CENT that I make (after I make sure my safety net is intact each month) goes towards the loan at the top of my list. I do not eat out as much as I used to, I do not shop as much I used to. I shop smart. Also ask yourself…is this item something I NEED or could this money goes towards my loans instead? I ask myself these questions almost EVERYDAY when I want to buy something frivolous for myself.
*Also, it is important to give credit where credit is due. Blake helped me organize and prioritize my loans. I would probably still be throwing my “extra money” all willy-nilly to the “lucky loan” that I randomly chose each month. In this case, don’t try to spread the wealth like I did. Reason #501 why I am grateful this wonderful man came into my life.