On an overcast day this fall, I checked a few boxes, entered a few numbers, and felt a small but significant weight lift from my shoulders.
10 years after finishing my B.A. and 7 years after turning in the final paper for my M.A., those degrees were finally paid off – five years ahead of time.
(This is how I felt about it.)
As of 2014, 70% of American college graduates have school debt. The average graduate is $33,000 in debt by the time they collect their diploma. After undergrad and graduate school, my school debt was around $50,000 – even with a little help from my parents, scholarships, and working while I was in school.
Just like everyone, I hatedhatedhated those monthly payments. I’d fantasize about how different life would be when I had an extra $350 a month with which to buy cheese and brightly colored skinny jeans.
So in the last two years, I committed to paying off those horrible loans ahead of time. The ‘tricks’ I used are hardly tricks. They’re fairly obvious, relatively well-known budgeting methods, but combined they work like magic. If you’re trying to pay down debt – school or otherwise – these will help.
1. Pay as much as you can (but not so much that you hate your life)
I know it’s incredibly tempting to lower those monthly payments when you find your dream apartment and it’s $200 a month above your budget. I totally, totally get it. But before you lower you payments, I’d encourage you to check out a loan amortization calculator.
The longer you take to pay off debt, the more money you’re giving your lenders.
Paying off $40,000 at 4% over 20 years = $58,174
Paying off $40,000 at 4% over 15 years = $53,258
That’s almost $5,000! And your monthly payment would only go up by $50! Which is, like, one Target impulse buy and one fancy co*cktail, right?
2. Teach ESL in Asia
Drastic? Yes. An awesome adventure that will help you save money like whoa? Also yes.
I spent the 25th and 26th years of my life chasing kindergartners around a classroom in Nei Li, Taiwan and stuffing my face with stinky tofu. With a 10% tax rate, a great exchange rate, and a very low cost of living, I was able to save $1,000 a month without even trying! I ate out a lot (like dan bing for breakfast most days), lived in a nice apartment, and even flew home and vacationed in The Philippines, all while wiring home a grand every month.
3. When you travel, do it cheaply
I’ve nearly perfected the art of cheap travel (all my tips are here) and I’ve snuck in tons of trips while still paying down my loans every month. Travel can be surprisingly affordable if you use Airbnb or stay with friends, stick to public transport, visit cheap places (or expensive places in the off-season) and cook your own meals.
I think it’s really important to continue to live a life you actually, you know, enjoy while sticking to your budget. I call it “putting my money where my happy is.” When I make time and space for the activities that bring me joy I’m less likely to self-medicate via expensive boots.
4. Buy a used car – with cash if possible
My car is not particularly sexy or impressive. It is, however, reliable, cheap to repair, and not so fancy that anyone wants to steal it. More importantly? I bought it with cash.
Or more accurately, I put it on my credit card to get a bunch of miles and then immediately paid it off. I’ve never had a car payment! Sure, sometimes I get jealous of my friends’ heated seats and climate control but then I realize that I am not my car.
And even if I was, I’d be little and zippy which really wouldn’t be the end of the world.
5. Buy just about everything secondhand
True Story: I furnished my entire apartment (from nothing!) for about $700. Yes, even including that cute couch. Nearly everything I own came from a thrift store, Craigslist, or the Ikea as-is section. And I’d like to believe that’s not painfully obvious!
Pro tip: if you’re looking for something specific on Craigslist (“midcentury dresser St. Paul”) but you always see the postings too late, use IFTTT to send you Craigslist alerts.
6. Learn to cook
We all know eating out is expensive and unhealthy. Yes? Yes. Cooking at home is more fun, more healthy, and a jillion times cheaper than eating out. I’ve been obsessed with this cookbook lately and if you want to get really frugal, check out the Good And Cheap cookbook. It teaches you how to eat well on $4 a day!
Also (and this probably goes without saying) drinking is ridiculously expensive. Did you know that co*cktails made with bottom self liquor have a 1,026% (!!!) markup? Let’s pre-game at home, shall we?
7. Cut the cable and land line
But I’m sure you already knew this, right? That’s what Hulu, Netflix, and Skype are for.
8. Use your library
For books, sure! But also magazines, cds, dvds and events. The public libraries here in the Twin Cities are always hosting movie nights, readings, and other events. All completely free!
9. Plan for a cheaper social life
It’s hard to be the friend who’s sticking to a budget when everyone else is chugging $13 co*cktails and being all “Oh, let’s just split the bill three ways” when you had a Diet co*ke.
One of the best ways to deal with this is to take initiative during the planning stages. When friends are talking about getting brunch, be the one to suggest the place with the $5 breakfast. When your friend wants to see a movie with you, suggest a cheap matinee or the second run theater. It’s easier to steer the initial decision than change someone’s mind.
10. Honor the ‘immediate yes’
Living on a budget means living with less. But how, pray tell, does one live with less and not come to hate their life? I’ve made peace with less by honoring the ‘immediate yes.’ The ‘immediate yes’ is that gut reaction you have when you see a dress/necklace/piece of art from the across the room, stop your conversation and drift towards it. Your vision practically narrows and you’re pretty sure you can hear the Hallelujah chorus.
When you experience this, you should probably buy that thing. Even if it’s expensive. If it doesn’t make you feel this way, maybe you should leave it on the shelf.
(It’s my experience that when you wait for the ‘immediate yes’ you buy a lot less but you’re much, much happier with what you buy.)
11. ‘Snowball’ your debt payments
When you’re paying off tens of thousands of dollars over decades it’s really easy to feel like you’re Sisyphus in ballet flats. Snowballing your debts doesn’t make a huge difference financially but it does make a big difference psychologically.
When you Snowball your debts you make minimum payments on all of the debts except the smallest one, attacking that one debt with a vengeance. Once you’ve paid off that first, small debt run around your apartment yelling “High five, self!” and then get to work Snowballing the next smallest debt.
Have you paid off significant debt? If you have, share your best tips in the comments – we’d love to hear them!
Edited to add: As with any conversation about finances, I’d be remiss if I didn’t acknowledge my privilege in this situation. I’m white. I grew up in a two-income household with parents who encouraged and (slightly) financially supported my education.
If you’ve read Nickel and Dimed or this blog post, you know that it’s actually very hard to save money when you’re really, truly broke. I want to acknowledge that these tips are for those of us fortunate enough to have cable and the occasional fancy co*cktail – people who do, in fact, have a bit of money to spare.
P.S. You can choose to want less + How to (at least start to) get your finances under control
