Rejoice with us friends – we have paid off my husband’s student loans! The only remaining debt that we have is our mortgage. Whew! We have a modest combined income (about $4,500 net a month), but we have managed to pay about 25% of our monthly income towards this one debt. This post will share our story and 3 Tips to Get Rid of Debt.
Step Number 1 to Get Rid of Debt:
- Face the music and know your numbers!
We sat down with a friend in 2011 who helped give us a snapshot of our financial standing. We were actually shocked to see the total amount for his student loans when we gathered all the student loan documents at one time. The total was $39,601. I think that was about what we were making at the time when he was a full-time student and I was working part-time.
We only had one type of debt (aside from our mortgage) but we had 5 different student loans that we were paying. You may have credit card debt, student loans, and car loans. It doesn’t matter what type of loan it is, just bring all the documents together and know what the current balances and interest rates are to start. Write it down.
Step Number 2 to get rid of debt:
2. Cut out any extras and simplify!
We have always been pretty good about eating at home, but this new goal really pushed us to cut out the pizza or Chinese take out nights that we fell into once or twice a week. Meal planning has been a lifesaver (budget saver) the past several months.
You may have cable, or memberships that you’re not using that you can cut out. Now is not the time to plan an extravagant vacation or over the top gifts. Get your family involved and talk about why you are not “living like the Joneses”.
Step Number 3 to get rid of debt:
3. Put everything extra towards the debt!
In 2011 we didn’t have a lot of extra money to put into payments, but we paid what we could. If we got any extra money, especially our tax refund, it went towards the student loan. When my husband started teaching, our income went up and we kept our expenses down.
Eventually we realized that it would make more sense for us to use our savings (which was earning less than 1%) to pay off the student loans which were at 6% interest. We kept $1,000 in our savings account, and put the rest toward paying down the debt.
I made a homemade thermometer that we could keep on our refrigerator. I wanted a visual reminder for all of us of what we were working towards together as a family. Here’s what it looks like:
At the beginning of 2014, the student loan debt was $21,790.42. We got laser focused and paid off $16,790.42 in one year. We kept our balance at $5,000.00 in case my husband taught for 5 consecutive years in the school district. At 5 years, there is a $5000.00 student loan payment/forgiveness. We just redirected the $1,000/month to our savings instead of the student loan. Instead of waiting another year and half, however, we finally paid the balance of $3,735.86 off last week. Current balance of student loan: $0!How we paid off over $16,000 debt in one year! #debtfree Click To Tweet
It feels great to be debt free, aside from our mortgage. We will now have extra money each month that used to be applied to the minimum monthly student loan payments.
One of the steps that I didn’t explicitly write is to increase your monthly income. That was undoubtedly essential in us being able to pay the loan off as fast as we did on our income, however, for many years we didn’t have a large surplus every month. Work with where you are now and do what you can.3 Tips to Get Rid of Debt. Read our story. #debtfree Click To Tweet
So, in summary, here are the 3 Tips to Get Rid of Debt:
- Face the Music.
- Cut Extraneous Spending and simplify.
- Put everything extra towards the debt.
I’ll be sharing more in 2016 about budgeting and money as I try to establish the habit of budgeting! I hope you’ll join me!
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