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Debt

Paying Off 6 Figure Debt and Still Living Your Life

Paying Off 6 Figure Debt and Still Living Your Life

This post may contain affiliate links. Check out my Disclosure Policy for more information.

The thing that I don’t like about some of the personal finance gurus out there is that they tell you to basically stop living your life to pay off your debt.

And I do get the reasoning, if you can get it done in a couple of months. If you can buckle down and be debt free in 2 months, absolutely do it!

But, what about if you have 6 figure debt and it’s going to take you years to get out debt? Do they seriously expect you to not live your life for years?

That would be crazy! And I can speak from experience (approaching the 4 year mark of my debt free journey and still have $66k to pay off) that you will burn out and be miserable if you do this.

I’m not saying spend all your money on fun things and have no money to go towards your debt. But, you should be doing things that are important to you on your longer journey.

Here’s how I have made it possible to still live my life while paying off $201k in student loans.

1. I am constantly trying to find ways to increase my income compared to my 6 figure debt.

As a teacher, my income isn’t exactly high. It’s just how it is in the US, teachers don’t make much money, even with a master’s degree. So, I found other streams of income to supplement my salary.

By increasing my income, it allowed me to still apply extra money to my debt, while doing the things I wanted to do.

When you have 6 figure debt, it helps a lot to increase your income. Whether you use the extra cash to pay off debt, or afford some of the things you want to keep in your budget.

2. I find ways to lower my expenses I don’t care about.

When I first started my debt free journey, I had to move home with my parents. The reality was that my minimum payments were $2,000 and my salary was roughly $3,000, 10 months of the year.

My salary was only this high because my parents live in New Jersey, where cost of living is high. In a lot of places in the US, my teacher salary wouldn’t have even covered my minimum payments.

This allowed me to slowly pay off my student loans. Eventually I could afford to move out, but I continued to live at home and put more money towards my student loans.

Find ways to lower the expenses that aren’t as important to you. For me, living at my parent’s house made sense because it allowed me to have a higher income and lower cost of living.

3. I have sinking funds.

Sinking funds are wonderful. They have helped me so much throughout my journey. I have sinking funds for expenses that I know will come up, like car maintenance or medical.

But, I also have used them to afford things I want to do in the future. For example, I created a moving out fund when I did decide it was time to move out of my parent’s house.

This allowed me to slowly save up money to afford a move. I was able to decorate and afford other moving expenses without it impacting my monthly budget when I did move.

Sinking funds also allowed me to go on trips and other experiences. I slowly saved for it in the months before and got to enjoy my time guilt free because the money was in my sinking fund.

4. I stick to a strict zero based budget.

Zero based budgets are a game changer when managing your finances. Basically what a zero based budget does is allow you to tell every single dollar where to go. If you need help creating your own zero based budget, you can get my template here that I use every month.

It gives you the control of where you spend your money. So, you can give yourself the money you need to do the things you love.

This is where lowering your expenses you don’t care about comes into play. You need to lower your expenses in those categories so that you can spend money in the places you want to.

Do these things at once to live your life and pay off 6 figure debt.

By doing these 4 things, I have been able to pay off $134k of debt in just under 4 years. I still have gone on vacations, experienced new things, and got a puppy.

You just need to decide where you want your money to go and make sure it goes there. Spend some time really figuring out what things make you happiest in your life.

Start saying no to the things that don’t bring you joy and start saying yes to more of the things that do. How have you still enjoyed life while paying off a lot of debt?

 

Debt

How a 6 Figure Debt Free Journey Is Different

How a 6 Figure Debt Free Journey Is Different

This post may contain affiliate links. Check out my Disclosure Policy for more information.

I say it a lot, 6 figure debt is no joke. And I’m not including a mortgage when I say this. I’m talking about 6 figures of non-mortgage debt.

This would be debt like credit cards, personal loans, car loans, student loans, etc. Basically I’m referring to anything that is debt, that isn’t a mortgage.

There are a lot of people in this boat. Don’t think that you’re alone.

I was there with $201k in student loans to become a teacher, which wasn’t the brightest idea. But, after just under 4 years, I have paid off $134k. I still have more to pay off, but the ridiculous burden is much less now.

Because I have experienced 6 figure debt, I know that it is much different than other debt free journeys.

From the start, you have to accept the fact that your journey will be different than most people because a lot of people don’t have 6 figure debt.

It also is going to be very different if this is your own debt, or if it is you and your partner’s debt. That makes a huge difference. For me, it was just myself that had all this debt and it was just me to pay it all off.

This is how a 6 figure debt free journey is different than others and what to consider if you are paying off 6 figures of debt.

1. The amount of time you will be on your debt free journey.

Let’s be realistic. We all would love to pay off our debt in 12 months. But, with 6 figures of debt, especially if you’re single, is going to take a longer time to pay off.

Don’t let this get you down. Never compare your journey to someone else’s, only use it for new ideas, motivation, or suggestions.

Paying off 6 figures of debt is going to take some serious time, but don’t let that get you down. Use it to motivate yourself to get creative and find ways to shorten your journey.

When I first started, my projected journey was going to be 8 years. I’ve paid off $134k in under 4 years. You can bet that this journey will not take me 8 years anymore.

I used undebt.it to figure out and track my debt free date. This is a great way to keep your motivation up throughout your journey.

2. The amount you send to debt each month will be much higher.

When you have 6 figures of debt, your minimums are naturally going to be high. That’s just how the math works. All over the #debtfreecommunity on Instagram is people sharing their monthly debt payoff. Myself included.

When I first started my journey, my minimums were roughly $2,000 every month. If I posted my monthly payment of $2,015 it looked like I sent a ton to debt, but I wasn’t making much progress.

My shovel was so small in the beginning because my minimums were so large. I was making these massive payments, but only a very small amount was higher than my minimum.

This meant that my journey didn’t get much shorter in the beginning.

Don’t get discouraged by this part in the beginning. Have faith in the process and keep working the plan.

3. You’re going to need to find more streams of income.

When you have 6 figures of debt, you’re going to need to increase your income to see progress. You can only cut so many expenses from your budget, but your income is infinite.

That’s how I made such large progress in my debt free journey. I moved to a high cost of living area, which gave me a higher teaching salary.

This also allowed me to make a lot more in my side jobs, I have 5 consistent streams of income. You can get a copy of my multiple income stream tracker here.

And I’m not saying you’re going to need to work your life away. But, find other sources of income and put it towards your debt.

This can be as easy as negotiating a raise at your current job, or working OT, if it’s offered.

4. To see a major payoff, you’re going to need to make major changes.

Like I said in number 3, with 6 figure debt you just need to do some things differently. In order to see major payoff, you’re going to need to make some major life style changes.

I mentioned moving to a higher cost of living area to have a higher salary. You probably thought, higher cost of living means higher everything else too, right?

You’re totally right, but not when you get creative about housing.

For me, I was making $3,000 a month with a minimum payment of $2,000. I moved to the area because it guaranteed me a salary that could at least support my minimum payments.

Most parts of the US, I wouldn’t have made enough as a teacher to even cover my minimums. So, I moved to a higher cost of living area and moved back into my parent’s house.

I told them my plan and explained to them that I would be putting every single extra penny I had to my debt. They allowed me to live rent free for almost 4 years and this is by far one of the biggest ways I was able to pay down my debt quickly.

This isn’t an option for everyone, but think of ways to hack your housing costs. Find a cheaper apartment, get a roommate, or use AirBNB to rent your space.

The key is to not compare your journey to someone else’s journey.

It can be really hard not to compare your journey to another’s. But, when you have 6 figures of debt, your journey will most likely look a lot different than most.

You’re not going to be super intense for 5 years. That would be absolutely insane. Maybe you can do months like that, but it’s not realistic to do multiple years.

Keep working on your plan and your goals. You’re going to get there, it’s just going to take a bit longer. Do you have 6 figures of debt, how has your journey been different than a typical debt free journey?

Money Management

How to Get Control of Your Finances

How to Get Control of Your FinancesThis post may contain affiliate links. Check out my Disclosure Policy for more information.

I remember when I got my first bill in the mail from my student loans. At the time, I was on campus at Syracuse University in my first semester of grad school. My father called me and told me a bill came for me from my private student loans for undergrad.

I didn’t even know I’d be getting a bill so soon after graduation, less than a month after. Talk about a reality check for me. My private loans didn’t come with a grace period apparently and they weren’t aware I was a student full time.

Panic ensued. Not because I’d need to pay that bill, I knew they would be deferred once I got the right paperwork to them. But because my private loans from undergrad alone were going to cost me $1,400/month in minimum payments.

Did I mention I was adding more debt at the time to go to grad school?

Yeah. Not the best decisions were being made, but I was under the impression that student loans were fine, it’s how everyone went to college. Did I mention I was going to school to be a teacher? Yeah, really bad decisions were being made.

Luckily, my reaction to bad situations is typically trying to figure out a way to fix it. I immediately jumped into action on the internet and reached out to my wonderful mentor that worked in the school of education.

I was determined to not let this ruin my finances or my life and control me for 20 years, like they originally would have with minimum payments.

These are the steps I took when my financial world was spinning out of control.

1. I took a close look at my current finances.

I wrote all of my accounts out, how much money was in all of my accounts and how much cash I had to my name. Then, I took a close look at my spending and where my money was actually going.

For me, my spending every month wasn’t bad while I was in grad school. I had some bad habits, like grabbing coffee between work and class, or grabbing dinner on my way home after my night classes. I was determined to make changes to my spending right there.

Luckily, my current situation wasn’t too bad. Of course, this didn’t include my massive impending student loan debt. But, I tried to focus on my current situation, not what was to be post grad.

2. I created a zero based budget for myself.

At first, it was hard for me to think about being on a budget. I had such a negative connotation of the word budget. There was zero part of me that wanted to feel restricted, like a budget would do.

It’s time to reframe your thinking about budgets, like I had to do. All a budget does is give you a plan for your money. And a zero budget makes sure you don’t leave any money on the table, it puts every single dollar to work for you.

Basically a zero based budget just means that every single dollar goes somewhere by the end of the month that came in. Your expenses equal your income. This allows you to reach your goals so much faster by using all of your money every single month.

Check out my post here that shows you exactly how to create your own and download the template I use to manage my zero based budget every month here.

3. I created a debt payoff plan.

Once I got myself on a budget and knew where my money was going, I was ready to get serious about my debt payoff plan. I knew it was going to be tight being a teacher and having such a high minimum payment.

My plan motivated me to keep going, even when I was only making small extra payments in the beginning. I love undebt.it to keep track of my debt payoff because it tells me my debt payoff month and updates as I make extra payments.

Creating a plan will get you motivated to start paying off debt because it shows you how much just a little extra every month can make a huge difference.

4. I supercharged my efforts throughout my journey.

At first, I just wanted to get my finances together. Once I felt confident with where I was, I was ready to really make changes. I increased my income through many different side jobs to pay off my debt faster.

This was life changing honestly. I eventually was making enough in side jobs that I lived off of that income, and my entire salary went to my student loans.

Then, I refinanced my student loans with Earnest, which was honestly the best decision I ever made. I decreased my interest rate by more than 2% saving me so much money and allowing me to pay off the loan faster. You can use my referral link and get $200 when you refinance your loans.

Before you refinance though, make sure you check out my post that outlines if refinancing is right for you.

The truth is, it’s going to be hard to get control over your finances, but you can do it.

Making changes is hard, especially when it comes to your life. But, your life will be better once your finances are under control. I am still chipping away at my debt ($66k left as of July 2019), but I am so much less stressed just from paying off as much as I have. My life isn’t controlled and dictated by money and I get to make my decisions for me, not because of money anymore.

I want everyone to be confident in their money and take back control over their own finances. If you’re struggling with your money, I know how you feel and I want to help you get to a better place. Check out my monthly coaching offer where I help you get to a better place financially and create your very own money plan. How do you feel about your money, in control or controlled?

Debt

Here’s Why Your Student Loans Are Getting Bigger

 

Here's Why Your Student Loans Are Getting Bigger

This post may contain affiliate links. Check out my Disclosure Policy for more information.

Student loans are a rare kind of debt. Most people take them out because they figure they’re “good debt,” and they can get a higher income with it post grad.

This usually is true and for some careers, you absolutely need a degree. But, you should be very aware of how much debt you are taking on while in school.

Of course, this is dependent on the degree you are going after. If you’re studying to be a doctor, chances are you will have a high income post grad. If you’re like me, studying to be a teacher, chances are your income is going to be lower.

Don’t make the same mistake I did and take out $201k to become a teacher. It will be nearly impossible to survive post grad, trust me.

And you just might find yourself in a situation of having your student loans get larger post grad, even if you’re making your payments.

How do student loans increase, if I’m making my payments?

I know it sounds crazy, but it’s very true. It happens to so many people. They make their minimum payments, but they realize their total is increasing, not decreasing.

This is the sad reality of student loans. Student loans are the craziest debt, in my opinion, especially federal loans, when you don’t understand them. They can’t be wiped away with bankruptcy and they can increase, even when making minimum payments. Also, they have a ton of different options for repayment and forgiveness.

But, that’s exactly why they are a problem and why they increase. People see they have a minimum payment of $0 and think it’s awesome.

The reality is that your loans are still accruing interest every single day. Once a year the interest capitalizes and now it’s part of your principal balance. Now, that total will be accruing interest and suddenly your loan has ballooned in size.

This happens to so many people and the fact that it even is possible is so terrible, in my opinion.

How can I prevent them from getting bigger?

The very first thing you need to do is become aware of your student loans and where your payment goes every month.

If your loans are private, you’re most likely fine. Usually, private loans don’t have the crazy repayment plans and require you pay off the interest and some principal in your minimum payment each month. To be sure, check your statement and see where your payments are going.

If your loans are federal, you need to very carefully check your payments. If you are on any kind of payment plan, you need to make sure your interest is being paid off every single month. If you see that your interest isn’t being paid off each month, this is when you get your loans increasing.

I’m not saying don’t use a payment plan option on your federal loans, I’m personally on one to lower my payment while I focus on other student loans. But, I’m sure to pay off at least my interest every month no matter what.

And this is how I prevent my student loans from getting bigger.

If you have student loans and are making minimum payments, I absolutely think you should check out how your payment is being made. Make sure you’re paying off the interest every month.

If you’re not paying off the interest every month and you see that it is growing. Make a change right now. Increase your payments to at least cover the interest. Make sure this happens by putting it in your budget and treating it like the minimum payment.

You might think it doesn’t matter, but once the interest capitalizes into your principal and it’s accruing even more interest, it will matter. It will make it much more difficult to pay off in the future.

Basically, just pay your interest in full every month.

That’s how I go about my student loans. No matter what, I pay off my interest in full. And I know that these loans qualify for forgiveness in 10 years of on time payments. But, that’s a super long time to be paying a minimum payment on these things.

Personally, I would much prefer to pay them off faster and just get to do whatever I want with my hard earned money.

Also, I assume that these programs won’t last. I don’t want to count on something that may not work out for me. Plus, I took out the loans and I absolutely should have to pay them back, so that’s what I’m doing. Do you have student loans? Have they increased in size while you pay the minimums?

Money Management

Why an Emergency Fund Needs to be More Than $1,000

Why an Emergency Fund Needs to be More Than $1,000

This post may contain affiliate links. Check out my Disclosure Policy for more information.

I know this is going to ruffle some feathers out there. The reality is that $1,000 in an emergency fund just isn’t enough. Cost of living in most places in the US, is just so much higher than this amount.

Realistically, you don’t touch your emergency fund much. I know for myself, I don’t really ever touch mine because I have sinking funds for most of the unexpected expenses that pop up. My emergency fund is truly there for job loss or serious health issues.

In both of these situations, $1,000 wouldn’t even come close to cutting it. My minimums just for my student loans are $1,100!!! I couldn’t even afford my debt minimums in the event that I lost my job.

Of course, this is why I encourage multiple income streams, but that’s not the point of this post. My point is that $1,000 isn’t going to support you in the event that you lost your job.

Everyone’s situation is vastly different, which is one of the biggest reasons that I don’t agree with a one number fits all dollar amount. Just depending on where you live, that number could be vastly different. It is dangerous to tell people a single number to work from because that could push someone into financial ruin.

This is especially true if you have large non-mortgage debt, like I did and continue to pay off. You’re not in a situation where you’re going to pay off your debt in a year. Unless you hit the lottery or something!

Those of us with large debt especially need to have more than $1,000 saved for emergencies. I encourage 1 month of expenses at first.

Depending on your situation, you may want to consider adding to your emergency fund while paying off debt. If you own a home, have children, have an unpredictable job, or any other situation that requires money unexpectedly, add more to it.

I’ve been paying off my student loans for almost 4 years. I still have $67k left. When I lived at home, I had a small emergency fund of $1,000 with my sinking funds. My expenses were very small and almost all of the unexpected expenses would be covered by my sinking funds.

Now, I have moved out of my parent’s house and I have been increasing my emergency fund every month. I plan to continue adding to it until I have 3 months of expenses saved.

Even though that money could be going to debt, I would feel much more secure knowing I have money set aside for emergencies. The reality is that it isn’t a case of if an emergency happens, it’s when an emergency happens. By having more set aside, it allows you to more easily tackle your debt.

You may think it is counter productive to have an emergency fund of thousands of dollars set aside when you still have debt. I definitely felt that way for a bit of time. Mostly because I just wanted my student loans gone so badly.

But, once you have that emergency fund set, it allows you to easily make extra debt payments because you’re prepared for something that comes your way. The stress of what if, doesn’t stop you from putting your extra money to your debt.

If you’re trying to figure out how to build your emergency fund while paying off debt, my budgeting template helps you to do this. It has a section for income, expenses, and savings. Creating an emergency fund is so important and it absolutely deserves a line in any budget until it is full.

When you have an emergency fund set, you are free to put as much money as you want to debt. So, how much do you have in an emergency fund while you pay off debt?

 

Debt

Debt Free Update: $133,718 Student Loans Paid Off!

Debt Free Update_ $133,718 student loans Paid Off!This post may contain affiliate links. Check out my Disclosure Policy for more information.

I’m super proud of this number. Honestly, it still surprises me when I see it and think about only having $67k in student loans now. And yes, I use the word only before that because this feels like pennies in comparison to where I was.

It truly amazes me how much more in control I am of my life now that I have paid off a significant amount of my debt.

My student loans defined me when I first graduated. They dictated my life. They decided my fate, not me. I had no choice but to do the things I did after college.

When your minimum payments are $2,000/month and you’re a first year teacher, you have no choice but to do what gets that paid every month and still allows you to eat.

It’s why I moved back to my parent’s house. I needed the low cost of living expenses in a high cost of living area. My salary was way higher than it would have been in other parts of the country as a teacher. I took advantage of it.

Between the higher salary and working so many side hustles, it’s the only way I got to where I am now. Well, that and really intentional spending and money management, of course.

What I’m doing now to pay off my student loans

Right now, I’m focusing on paying off my private student loans. I refinanced them in September 2018 from a 7% interest rate down to 4.97%. This has saved me so much money in interest and I highly recommend refinancing with Earnest, if it’s right for you! Read my post all about deciding to refinance here.

Refinancing isn’t for everyone, but when used to lower your interest rate, it can really help you pay off your debt fast. I personally refinanced $45k and am now down to just under $15k. If you’re interested in refinancing, you can use my referral link to get $200 when you refinance!

With having so much debt, you really need to do what works for you on this journey. It’s hard, but you can do it and you can change your life for the better. I’ve experienced major life changes for the better and I still have $67k left!

What I plan to do

I often imagine how much more my life will improve once I have no debt. The opportunities that I will open up to myself are endless at that point.

It can be done and it will be done. Even during the summer, when I don’t get my salary from my old school.

I’m teaching summer school and VIPKID during the summer to bring in some income. I also have my summer sinking fund to pull from and my leftover money from June.

Yes, my debt payments will decrease this summer. I don’t plan to make any extra debt payments in July. Whatever I have left at the end of August will be sent to debt.

I am a planner by nature, I can’t help it. I’d rather be over prepared than under. So, that’s why I’m not risking it and waiting until I am paid from my new school to send any extra money to my student loans.

This is definitely hard for me. I stay motivated by seeing my debt total go down. It will still decrease because my minimum payment on my private loans is $865 and it doesn’t accrue anywhere close to that amount every month.

But, I won’t be making any crazy progress this summer. Again, it’s okay because I know I will get back on track in the fall. I just need to weather this storm.

Handling six figure non mortgage debt on a single income is a different kind of journey. If that’s you, send me an email! I want to connect with more people who have been or want to be on a similar journey to mine.

How much debt did you start with?

Debt

Paying Off My Student Loans Is Saving Me $12k A Year

How I'm Saving $12k a Year by Paying off My Student Loans

This post may contain affiliate links. Check out my Disclosure Policy for more information.

Everyone considers student loans to be a good debt. And for some people, it absolutely is a great way to get the career you love. But, for others, it may not be the best move.

I know for myself, I didn’t even know what student loans were when I was signing the checks for 5 figures of student loans. Naively, I didn’t even know how they worked and I definitely didn’t know what interest was.

Personally, I was in the fortunate position of never having any other debt than student loans. Unfortunately, this meant that I truly had no idea how debt worked.

I signed myself up for $201k in student loan debt and had absolutely no idea that it meant I’d pay SO much more in interest. And I had no idea that it would completely dictate my life post grad. But, that’s a whole other topic.

Student loans are crazy because they allow young adults to take out mortgage sized debt with high interest rates and little to no education. I was taking out loans for 5 figures, totaling $201k, some with 8% interest, and no education on financial literacy.

This was my fault completely, I take ownership of it. But, I think this is a serious issue. One that needs to be changed ASAP for the future young people in our country.

And now that we’re in this situation, what can we do for all of us drowning in debt. I’m not saying loan forgiveness is the answer, like it has been thrown around lately in the news. It absolutely is not the answer.

We took out the debt, we should absolutely be required to pay it back. But, we can do something to change our situations right now.

I graduated grad school in August 2015 with $201k in student loans, mostly from undergrad. Never once did I expect some program to bail me out. I’ve absolutely worked my butt off to pay off $133k in student loans since graduation.

Once I finish paying these off, I will be saving myself $12k every year, just in interest. I would have originally been paying $12k every year for 20 years, if I didn’t commit myself to paying off my debt.

Do you know how much that is over 20 years? $240k. Of course, some of them would drop off at the end and maybe I’d have refinanced my loans to get a better rate. But, that’s a TON of extra money just getting thrown away, on top of the principle of $201k.

I’m not even including my principle payments in this number. That number would be much bigger. I’m most concerned about the money I’m just throwing away to interest every year. It’s doing nothing for me.

So, how much money are you throwing away to interest every year? I encourage you to find out by looking at your statements and seeing how much goes to interest every payment you make. Or, you can use your tax statement you get every year.

Another way to see your students loans and how much money you’ll put to them is by using undebt.it. It will allow you to see how much money you’ll put to your debt on a normal payment plan, and then what more payments will do to it.

Our society preaches that student loans are good debt. Yes, they can be valuable to better your career, if done correctly, but you need to be careful about student loans.

My question to you is, are you planning to pay off your student loans early? If not, what’s stopping you?

I’ve been in your exact shoes and I’m happy to say that my life is so much better already and I haven’t even finished paying off my student loans.

I still have $67k to pay back, but I can finally breathe now and not feel like I’m totally drowning in debt. You can feel relief, you just need to do the work like I did.

I want to know what’s stopping you from paying off your student loans, send me an email or comment below.