The key to financial freedom is discipline. When my husband and I married collectively we almost owed $50,000 in student loan debt. Together it was a lot of debt that we had accumulated and it was only our undergraduate debt. My husband enrolled in graduate school to obtain his MBA and I was stuck with the thought that debt was going to be an issue in our future if we didn’t make some changes. Once he was in school again, we decided that he would not take out any more student loans nor would he allow his job to subsidize his education because we didn’t want him to be locked into service when he may have needed to explore other options. Below I share how we paid off 100% of our student loans and paid for his graduate school education out of our pockets.
1. Live below your means
After you land your new job out of college, it will be very tempting to spend your new money on new clothes, a shiny new car, and the best apartment you can afford. However, we factored in our debt to how much we could actually afford and realized that we were not making as much as we thought. We didn’t by a new car. We used the one we already had which was paid off. We found the cheapest, but the best apartment we could in the best neighborhood that was closer to our jobs so we could save money on gas. Lastly, we established a strict budget that we both adhered to for clothing, food, etc.
2. Pay your bills on time
We went online and established automatic bill pay to help us keep the payments regular. I paid off my loans first because mine had the highest interest rate attached to them. While he paid his school bill monthly, we also paid his monthly loan payments at the same time.
3. Use extra money received to pay down debts
Income tax return time is often a time where people splurge on their wants. However, we used our entire returns to pay down our student loans. We did not have children at the time so our returns were not a lot, but it did help us slowly lessen our debts. Additionally, we always paid more than the minimum.
4. Be committed to alleviating our debts by budgeting
It is almost inevitable that an emergency will come along and you will need to fork over extra cash to cover it. In order to do that it is imperative that you develop an emergency fund and budget.
Here are some budgeting techniques from a previous post that I would like to highlight because using these techniques will also help you pay down your student loans:
- Create a budget. Use a Budget worksheet to help you keep track and stay on track. http://budgetworksheets.org
- Don’t overspend. Make sure your budget is realistic and hold yourself accountable. If you are married your accountability partner will be your spouse. If unmarried, consider being accountable to a financial advisor.
- Set financial goals. Setting goals, make it clear that you are striving to reach a particular target, which will help motivate you on your road to financial success.
- Don’t slip. With all of your might and power: pay your bills. Making sure you are putting a little aside monthly for emergencies and cutting out lavish expenses will help you reach your goals.
5. Pay a little extra each month
My husband is also an artist. But he didn’t want to be a “starving artist” so he had to make his art projects a side hobby. In the meantime, he found an enjoyable job that paid him reasonably. Similarly, I found jobs I had experience doing so I would not receive an entry-level salary. Experience and education pay. Frankly, your salary should afford you the opportunity to pay your bills if not, it’s time to look for a new job, gain a new skill, and make yourself more marketable so you get paid more.
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Seven Ideas for Handling Finances Better