I'm ashamed to say the first $3,700 of my student loan took nearly three years to pay off.
And not because I lacked funds. It just wasn't a priority.
I graduated in 2011 and made the minimum monthly payment until the last few months of 2013. I figured the loan would get paid off eventually so what was the rush? (Not my brightest thought.)
Everything changed when I got the urge to start a freelance writing business. Before I became my own boss I wanted to get rid of the lingering student loan so I got serious and paid off $4,000 in a little over six months.
I was fortunate enough to not have a huge amount of student loan debt. But I'm proud to have increased my monthly payment over 500 percent to crush the rest of it on a very modest salary. Here's how I did it and how you can too:
Find a "Why" That Ignites a Fire
Before taking debt seriously I spent money at the club, on happy hour, on clothes and vacations. Sure, I saved some money for emergencies and invested. I just didn't find repaying debt that important.
It turns out the long-term goal of becoming self-employed was more fulfilling than the short-term high of shopping for instant gratification. So I switched into debt repayment high gear.
The reason "why" you choose to repay debt aggressively may be different, but the bottom line is the same. If you're passionate about something whether it's traveling, starting a family or buying a home you'll make the sacrifices necessary to repay debt faster than ever. Look for your "why" and run with the momentum it gives you.
Choose a Budget Plan That Works for You
I've tried the traditional line-item by line-item spreadsheet budget many times without success. I always forget to check it before making a purchase and I fall off track.
So I ditched the traditional budget, moved to a zero-sum budget and gave myself a non-essential spending allowance. With this method you give every cent you earn a purpose. Your income minus your monthly expenses should equal $0 - hence the name. It's perfect for an impulse spender like myself.
To create a zero-sum budget I first reduced my expenses. I cut out Netflix, Hulu, my gym membership, FICO score monitoring and anything else that was non-essential. Then I made a plan to put 50 percent of my income towards financial goals including repaying my student loan, investing, saving for emergencies and retirement.
The amount I allocated to debt fluctuated slightly month-to-month if I had money to spare. During tax season for example I was able to devote a portion of my tax return to my student loan.
Ultimately, there's no right or wrong way to budget. Don't feel bad if what the experts recommend doesn't work for you. Try a few methods and stick with what helps you repay the most debt.
Set Up an Easy (or Automated) Payment Schedule
I organized my expenses by pay period and wrote them down on a "fancy" sticky note in my day planner. As soon as the direct deposit hit my account biweekly I referenced the sticky note and transferred the money where it was supposed to go.
Here's what my schedule looked like:
Payday 1
Loan - $250
Bills, rent, allowance - $1,108
Total - $1358
Payday 2
Loan - $379
Roth - $500
Mutual Fund - $100
Savings - $129
Bill, allowance - $250
Total - $1358
I put a check mark down when I completed each transaction and it felt damn good.
As you can see, a debt repayment system doesn't have to be elaborate. You can even set up automatic bank transfers for bills or deposits to set and forget them. The less burdensome your debt repayment schedule the more likely you'll stick to it.
Of course there were some months when my zero-sum budget got tight. After all, unexpected expenses pop up -- that's life. My goal was to max out my Roth IRA but that's the first area I dipped into to cover unforeseen expenses. My main priority was repaying the student loan so it took top priority.
Why This Worked to Increase My Payment
Passion, the right budget method and a no brainer payment schedule is what led to paying my student loan in full. You'll be surprised how little you can survive off of when you limit yourself for a purpose.
Still it wasn't a walk in the park.
I bought clothes at the thrift store, I had to say no to drinks with friends and I declined invitations to go for lunch with coworkers. My cubicle neighbor at work even chastised me for being too cheap. But I didn't care.
I had a larger vision and repaying my student loan was the first step to getting there.
Is my debt repayment journey completely over?
Not just yet. My husband and I have a car loan and other debt we're working towards paying off within the next year. But we're almost there and we'll keep chugging along until it's repaid.