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Now that I’m finished with my grad degree, my loan payments are about to begin. This might sound crazy, but I’m actually really excited to start this journey. As I shared in my student loan story I have about $200k in student loan debt, mostly from my undergraduate studies. When it all really hit me how much I owed, I quickly began searching the internet and Pintrest to find out as much information as possible about debt payoff. This was almost a year ago now (Fall 2014) and I can’t wait to put my plan into action. Through the process I found these helpful tips that I have been using throughout grad school, and will really start using next month when my first bill comes in the mail!
Find a budgeting system that works for you, and stick with it! I was shocked to find how much I was carelessly spending each month, mostly on going out to eat. The easiest way I have found to budget is to use Mint to track all my spending. I have all my banking accounts linked up to my Mint account and created a budget for the things I spend money on each month, like gas and groceries. Also, it reminds you of the bills you have to pay and you can get a free credit check with advice on ways to improve your score! They even have an app to make it super easy to check and edit your budgets whenever you want.
2. Manage your Loans
For me, this meant using ReadyForZero to manage my loans. This tool allows you to enter in all of your loans and create a plan to pay off your debt. It even has this nifty tool that lets you see how much faster you would pay off your debt and how much your would save by making larger payments. Also, it shows you how much your daily interest is, talk about motivation!!! I have to say I am not planning to follow my plan completely that they mapped out for me because I don’t love the order that they pay loans off in. They go by the smallest loan with the highest interest rate, and that just isn’t something I want to do. However, this tool is wonderful to see your progress and easily calculate daily interest rate, how much is left, etc.
Update July 2017: ReadyForZero no longer offers their service. I have spent the last couple of months trying to find a tool that works like it, I couldn’t find anything and almost started making my own tool. Then I found this tool and I couldn’t be happier with it! Check out my review.
3. The Snowball or Avalanche Method
Look into Dave Ramsey, the man is a financial genius. He has some great tips about managing your finances in general, but has a debt repayment plan called, the snowball method. This method has you focus paying down one specific loan by putting all of your extra money towards this loan. All your other loans you should make a minimum payment on. When your focus loan is paid off, you apply that payment to your next focus loan. How you pick your focus loan should have some reasoning, either you are focusing on loan amount, interest rate or a combination of both. If you’re focusing on the smaller loans first, this would be the snowball method. This method plays more to emotions because you get small victories in the beginning to motivate you through the end. If you focus on your highest interest loans, this is the avalanche method. This method is purely mathematics and allows you to pay less in interest. Personally, I am focusing on my highest interest rate loans first, if I have more than one loan at a certain interest rate, I focus on the larger one.
4. Get Organized
This is going to look different for everyone, but it is important to find an organization method that works for you. Personally, I use a combination of ReadyForZero and a binder. ReadyForZero allows me to keep track of the bigger picture of my plan, how much I’ve paid off, my daily interest amount, etc. While a binder keeps all those pesky bills organized because they tend to go missing if they don’t have a home, and it helps me keep track of each individual loan I have.
5. Have Fun
During grad school I said no to doing a lot of fun things because it would cost me money. At the beginning, I was in hardcore debt payoff mode, and wanted to put as much money as possible to my loans. But I sacrificed having fun with my friends, and eventually the stresses of going to grad school full time and working full time weighed down on me. I realized I needed to enjoy myself and quickly found ways to do that without spending a lot or any money. My personal favorite is having a potluck with friends. What’s better than great food, great friends, and wine. It’s a lot of fun, and pretty cheap, too.
The goal of paying off student loans is pretty hefty, with a plan it makes it much more manageable. I hope these 5 tips help you as much as they have helped me to plan my debt payoff. What are some tips you have for making a debt payoff plan?