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Debt

How to Navigate 6 Figure Debt

How to Navigate 6 Figure Debt

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

6 figure debt is no joke. And I’m not talking about a mortgage, I’m talking about all the other fun kinds of debt that are out there.

I’m 27 years old and had $201k of student loan debt to my name once I graduated as a teacher. Yeah. You read that right and yes, I was stupid to take out that much debt to become a teacher. I’m well aware now. But, that doesn’t get rid of my debt.

I’m at the point now where my debt doesn’t feel so overwhelming. It definitely makes my budget trickier, still having a minimum payment of $1,100, but it’s a lot better then $2,000. And now that I’ve paid off $127k, the process is moving much faster.

I’m now in the 5 figure debt club. This was absolutely something I celebrated. 5 figure debt is so much better than 6 figure debt. And it was right around my half way mark too.

I’m at the point now though that it’s frustrating to think about the things I could have done with this money. I could have bought a house in cash with the amount of money I have put towards my debt. 6 figure debt is not fun, especially on a single income.

Over the last 4 years I have found some ways to help get myself through this. It’s been a long journey, but one that I know will be worth it once it’s done.

1. Don’t deprive yourself to pay off your 6 figure debt.

Yes, you need to cut your expenses to pay off your debt. But, learn from my mistakes. Slowly make these changes. Don’t try to drastically change your life in the beginning. All this will do is set you up to fail and feel down on yourself.

When you have 6 figure debt you know you’re going to be on a long journey. There is no avoiding it. This means you need to be realistic with what you cut from your budget.

But, how can I actually do this?

My biggest tip is to look to see what expenses you can live without. How I managed this was by looking at my transactions the previous month. I was so angry by how much I spent eating out, that I cut this from my budget first. This would be hard to cut out completely, but I limited it. I made sure I was aware of my spending in this category throughout that first month. Also, I made sure I only went out to eat to be social and not for convenience.

I suggest you do the same when you’re first starting out. Cut whatever makes you the most angry. Every time you go to make a purchase in this category, check in with yourself. Is this necessary, how has my spending been in this category so far?

Once you have done this, I suggest seeing if there are ways to do the things you enjoy for cheaper. For example, I won’t give up getting my hair cut and I won’t do it myself. However, I do spread out my hair cuts much more and make sure I get a cut that doesn’t need to be maintained.

Being in 6 figure debt is hard, which is why you shouldn’t deprive yourself throughout the journey. You should be more intentional about where you spend your money though.

I also love a good no spend month with 6 figure debt. You can go one month with not spending anything on extras, it’s short and super effective. I don’t recommend this for long term, since you’re going to be in debt for a longer period of time.

2. Get creative about big monthly expenses.

Unfortunately, there are just some things in the budget that you can’t cut out. Like, your housing. But, you can get creative with this category. Depending on your situation, you may need to make some major changes. I think housing is one of the best ways to save money. It’s typically a huge monthly expense. If you can get it as low as possible, you’re going to help yourself a lot.

For me, I literally didn’t have any money for housing with my minimum payments when I graduated. No teacher salary gave me a high enough salary to afford both. That’s when I realized I had to move back home with my parents.

This did 2 things for me, lowered my housing costs and put me in a high cost of living area. Which also got me a higher teaching salary. Is it ideal to live with your parents at 27, no. But, it has allowed me to pay off a ton of debt in a short period of time.

If I didn’t move home with my parents, I would have been putting every single expense on a credit card. There was no money left over in my budget, if I had rent. My current situation would have been so much worse then it was when I graduated.

Figure out ways to cut your housing expenses. Can you rent a smaller apartment? What about getting a roommate? Could you move in with a friend and split rent? The more money you can save in housing, the more that can go to your debt payoff.

3. Create a plan to pay off your 6 figure debt, but don’t be afraid to change it.

Like I have said a few times throughout this post, this is a long journey. When you’re first starting out, you’re going to make this perfect debt payoff plan. You’re going to be so excited to get things moving. But, life happens.

You need to make changes for life, or you’ll never get out of debt. It doesn’t make sense to be tied to a financial plan. These plans can’t take into consideration the things that life will throw at you. You’re better off delaying your plan, then going into more debt.

This also means that you can change the order that you pay off debts in. Nothing is telling you how to pay off your debt. Of course, there are plans out there and I’m sure you created your plan based on one of them. But, that doesn’t mean you need to follow it exactly.

Right now, I’m paying off my private loans. It doesn’t follow the snowball or the avalanche method. But, it makes sense for me and my current situation. In general, federal student loans are a bit more forgiving than private student loans. For that reason alone, I am paying them off first. My private loans also come with a minimum payment of $865 and I can’t wait to take that out of my budget.

Figure out what works best for you and make changes to keep yourself going. With 6 figure debt, paying off debt is paying off debt. Get it gone in whatever keeps you going on this journey.

4. Increase your income.

When you have 6 figure debt, you absolutely need to increase your income. It’s simple math. There is no way to get out from where you are without more money coming in. Figure out what you can do while keeping your sanity.

My rule is that I’ll always try it to see how I like it. If it’s too much with my teaching schedule, I eventually stop it. Of course, I can always do something short term. It makes it so much easier when there is an end date in mind.

With that being said, make sure that you enjoy what you’re doing. If you’re miserable, going to another job is going to slowly drain you. It’s just not worth it. You need to find something that you enjoy that also brings you in some extra money.

However, I also remind myself a lot that I can do anything for a short period of time. So, maybe you get a side job that you know you will be done with in a month. You can feel stretched for one month and you know you will be done soon.

It all comes down to what you are willing to do.

That’s really it. What are you willing to do to get out of debt. Some of us are willing to go crazy intense to have it be gone. Others want to live a little while they tackle their debt. It’s all about what you want to do. For me, I was very intense for about 3 years. I needed to take my foot off the gas though. I was burning out and getting very frustrated by how much my debt was holding me back from.

The reality was that my debt was no longer holding me back. I had paid off enough that it was no longer a huge burden anymore. I had put those restrictions on myself trying to see how quickly I could get this gone. The issue with that though was that I wasn’t living my life. Now I have a better balance and I’m still making extra debt payments every month.

So, I want to know, do you have 6 figure debt? Are you actively trying to get rid of it? If you aren’t, what’s holding you back? Sometimes all it takes is someone else to look over your situation and I’m happy to be that person for you. What have you done to pay off 6 figure debt?

Debt

How to Get Quick Debt Relief

How to Get Quick Debt Relief

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

It took time to get into debt, so of course it’s going to take time to get out of debt. But, there are things you can do to experience quick wins to get you some debt relief. When you are feeling completely overwhelmed by your debt, sometimes you just need to free up a little cash flow to feel better.

I know when I hit my financial breaking point, I was totally overwhelmed. When my student loans went into repayment, I’d have a monthly payment of $2,000. And that was just the minimum, on a teacher’s salary.

To say I needed some debt relief was an understatement. I remember being in grad school and having no idea how I was going to afford everything.

That’s when I started getting into personal finance. I started looking at my situation differently. I stopped thinking about how much debt I had. The only thing I thought of was how to get my cost of living down and paying down my debt.

You need to stop thinking about what you can’t do in your situation. What can you do right now to help get you some debt relief.

And I’m not saying you should do any shady things. I’m saying look at your situation and start getting creative to get some quick debt relief.

1. Call every monthly bill you have and try to get a lower payment.

I’m not saying your monthly debt bills, I’m talking about other bills that you can negotiate. Most of the time, if you say you are going to switch providers, your internet and cable will lower. Worst case that happens is they say no. Then, you start shopping for other providers.

If you do this with a few of your monthly payments, the money saved will add up. This won’t help with your debt relief, but it will help with your cash flow. The money you save will go to adding more to your smallest debt to pay it off.

By spending some time shopping around for different options, you’ll be surprised how much you can save. A lot of the time we get loyal with the company that we originally did service with. The problem with this is that there are constantly new companies starting for all services.

This is fine, but when you’re struggling with your debt, it isn’t helping you. Shop around and see if you can get a better price. Lowering multiple monthly bills will free up money to go to debt.

2. Cancel any subscription you don’t use for some debt relief.

Cut out any subscription or monthly bill that you don’t use. After a while, we get complacent spending money on subscriptions we don’t even need. Get rid of them. It’s not helping your situation.

If there is a subscription you like, see if you can get something similar for a lower price. Or, cancel it for now until you pay off some of your debt.

Whatever money you save by not having these subscriptions, throw it at your smallest debt amount.

3. Sell big ticket items around your house.

Just like how we get with our subscriptions and monthly bills, we tend to hoard things in our houses. Anything that you can part with that will earn you some money, sell it! You’d be surprised by how much stuff you have in your house that can be sold.

I suggest looking at furniture items that you don’t use or can see your house without. Personally, I like using Facebook Marketplace to sell my furniture that I don’t need anymore. It’s easy and immediate cash for your items.

Whatever money you get from selling things, put it towards your smallest debt. Are you seeing a pattern here?

4. Lower your housing costs.

This was the true game changer for me. If I didn’t move back home to my parent’s house, I would never have been able to pay any debt off. This brought my housing cost down to zero. When I felt like I was drowning with my payments, this saved me.

You don’t need to move back home, but think about how much money is going towards housing. How can you lower that expense. Can you get a roommate? Move to a lower cost of living area? Downsize?

There are so many ways to lower your housing expenses. It just depends on what you’re willing to do. I see so many people spending SO much money on housing. And are drowning in debt.

To me, thats a no brainer. It’s such an easy way to free up some cash flow. Downsize to a smaller living arrangement and put all the freed up cash towards your smallest debt.

5. If you have a large car payment, sell the car for debt relief.

I know, you’re probably thinking that you need a car! I get that, I need my car too. There is no public transportation for me to use. I’m not saying get rid of your car, unless you truly don’t need it.

I actually babysat for a family that moved so that they could be walking distance to work. This allowed them to drop to a single car family. It was awesome and serious goals.

Back to where I was going with this. Sell your car and get a car with a lower car payment. If you have savings, use the savings to buy the car outright. Not all of your savings obviously, but take what you’re comfortable with. Make sure to keep at least 1 month of expenses in there.

If you’re someone that bought a new car with nothing down, chances are your payment is very high and on very long terms. Get rid of it! If you’re drowning in debt and feel helpless, there is no reason to have that car. And I’m not saying get a car that isn’t safe. I’m saying get a used, reliable car, with a low car payment, if needed.

By doing this, you will lower your monthly expenses. The freed up cash will go towards your lowest debt amount.

It’s all about what you’re willing to do.

The only way you are going to experience some debt relief is to make changes. You got into debt living this kind of life, you can’t continue it and get out of debt. What it all comes down to is what you’re willing to do to get some relief.

A lot of people aren’t willing to do the hard work and change their life. These changes that I mentioned can help you within a month. Others will take longer, but will see bigger changes. For example, moving might take longer to do, but you will experience a huge change with doing so.

This is a lot to do on your own, but you can do it. If you need more accountability, check out my 1:1 coaching that I offer. It’s for you if you know that your debt is overwhelming you and need to make a change. What have you done to experience quick debt relief? 

Money Management

Building My Emergency Fund While Paying Off Debt

Why I'm Building My Emergency Fund While Being in Debt

Usually it is always said to pay off your debt before you build your emergency fund up. I would encourage you to have at least 1 month of expenses, if everything is very predictable in your life. What I mean by this is you don’t have any health issues, no kids, no house, fixed income every month, etc.

If you are someone with a variable income, kids, or a house, I would strongly recommend you having a larger emergency fund. At least have more sinking funds that can help you in the event of the unexpected. I would feel more comfortable with at least 3 months of expenses, in this situation.

Currently, I live with my parents, have no kids, no major health issues (I do have a sinking fund though), and have a fixed income I can rely on with additional income that varies. I only have 1 month of expenses saved up right now.

This has worked for me for the last 4 years while I paid off my debt. But things are about to change for me and I want to be prepared. I will also be changing my debt free plan shortly as well.

As always, personal finance is personal, so you need to do whatever works best for you.

1. I am moving out in June and my monthly expenses will be increasing.

Since I will no longer be living at home, my monthly expenses will be increasing and will be more unpredictable. This means that I will need a larger emergency fund. I’m not planning to stop my debt free journey for this, but I am adding to it now each month as the move approaches.

I have saved $950 for a moving out fund. This it to cover anything that might come up in the process of moving. If this is not used, then it will be immediately transferred to my emergency fund account. This will help me to hit my new emergency fund goals much faster.

Once I move out, I will continue to add to my emergency fund until it gets to my 3 months of expenses amount. I will not stop my debt free journey for this, but contribute some each month to help me get there. I do have cash available in a few sinking funds in the event that something happens that is larger than my emergency fund.

2. I will be done paying off my high interest debt shortly.

I started with $201k in student loans ranging from 3%-8.05% rates. This basically guarantees a long debt free journey on a teacher’s salary. When I first sat down and tracked it out, it was going to take me 8 years. This would bring me to about 31 years old. This didn’t take into consideration income increase or change in living situation.

I knew that I’d be able to do it quicker since I planned to increase my income with side hustles. And I wouldn’t be living with my parents until I was 31!

Once I am done paying off my high interest debt, anything over 5%, I will be shifting gears a bit. I plan to still pay off debt. But, I will also be building my emergency fund. Then, I will contribute more to my retirement accounts.

My plan is to split the difference of my leftover money each month. This means that any money I have leftover in my budget, half will go to debt and half will go to those goals.

I cannot wait for this to happen. I hope that it will happen at some point in the next year. With me starting a new job and moving out, things are a little unpredictable right now.

3. Time is on my side right now with compound interest.

The reason I am planning to change my financial plan once my high interest debt is gone is because I will still be in my twenties at that point. This is important because it gives me more time until retirement. For me, I consider time to be super important to consider when making your plan.

For me, I want to start investing more as soon as possible. The reason being that the longer my money can sit in my investment accounts, the more compound interest will work for me.

Compound interest, in simple terms, is when your interest earns interest. This is what will really build your wealth because it will make your money grow much faster without you even adding more money to it.

4. Since I will only have low interest debt, my investments will have higher returns.

I’m still going to be making debt payments, but I will be also focusing on my savings and then investing. A lot of people say it isn’t worth it when you still have debt because you are losing more money in interest then you’re making.

This is why I am waiting until my high interest debt is paid off. I will also wait until my private loans, which are 4.97%, are paid off. The reason being that my minimum payment each month is very high ($865.00). By getting rid of that monthly payment and my high interest debt, my money will be working much harder for me.

The high monthly payment I have with my private loans is a very large amount and I know once that is gone, I will be able to reach all of my other goals so much faster.

You have to do what works best for you!

You need to do what works best for you and your current life. Your finances should change as your life changes, and that’s exactly what I am doing. I am so excited to start this new part of my life because I will finally be seeing my money grow instead of putting it all to debt.

I encourage you all to look at your finances and make sure that you are financially set for emergencies, even if you are paying off debt. The point of paying off debt is to never go back into debt. If you are prepared for an emergency, you’re going to end up right back in debt. That’s why I don’t believe in having only $1,000, it’s not practical and potentially sets you up to not be prepared for an emergency. Do you save and invest while paying off debt?

Debt

Making Sacrifices While Paying Off Debt

Making Sacrifices While Paying Off Debt

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

Paying off debt can be a scary thing to start. I know for myself, I was terrified of my reality when I hit my financial breaking point during grad school.

6 figures of debt and a teaching salary scared the living you know what right outta me. I didn’t know what I was going to do. I had dug myself such a massive hole and I had the absolute smallest shovel to get myself out with.

To this day I thank my grad school advisor for smacking some sense and reality into me when I was still in school and my loans were in deferment.

Without her, I would have been in a longer program, making less money in grad school, getting less scholarship money, making less as a teacher in NY, and paying for rent. The numbers literally didn’t add up and I most definitely would have been living on credit cards for my daily expenses.

Because of her, I made sacrifices so that I can build myself a much better future. I moved home after graduation to live rent free and get a higher salary in NJ. This allows me to reap the benefits of living in a high cost of living area (higher salary), while not paying the sky high rent in the area.

Sometimes you need an outside person to look at your situation and help you create a game plan. I didn’t think to actually create a fake budget at the time, I didn’t know anything about money back then. She got me to start being interested in personal finance and taking an active role to get out of debt ASAP.

If you’re someone that needs help with this, reach out! Find someone to help you. I’m always available to help and if you want something with more structure I have email coaching to help you.

The reality is that you’re going to have to make sacrifices while paying off debt, if you want to do it quickly. For me, I really enjoy my life now while paying off debt. Of course, I’m planning to move out shortly, but this journey has showed me what I truly value and enjoy. Most of which costs little to no money.

Here are some reasons why you should make sacrifices while paying off debt.

1. It can help you save money on high ticket expenses while you pay off debt.

The classic example is the money you spend on housing. This is always a high ticket expense in your budget and one that you should try to get as low as possible. By figuring out ways to lower your housing expenses, it will allow you to spend a little more in areas that may bring you more joy.

For example, by living at home with my parents I am making my housing expenses zero. This allows me to put a ton of money to debt, but also lets me still go to the gym, have a larger grocery budget, and occasionally go to happy hour or dinner with friends.

I’m not saying move back home with your parents. That’s not always realistic, but start thinking creatively about your housing situation. Can you get a roommate(s)? Can you find a smaller or cheaper apartment to rent? Recently, there have been people in the #debtfreecommunity on IG that are selling their houses to pay off their debt.

You need to figure out what you value and what you want to spend your money on. For me, the sacrifice of living with my parents is by far worth getting out of debt faster.

2. It can increase your income while you pay off debt.

I love a good side hustle and I think everyone should have multiple streams of income. It’s worth it to sacrifice a bit of time short term, for the long term gain of being debt free.

Currently, I work a lot of side hustles and it does take a decent amount of my time. Is it ideal? No, but I know it is temporary while I pay off my debt. Without a doubt, by working these side hustles it has brought my debt free date closer and there is no way I would have paid off as much as I have without them.

The great part about side hustles is that you have total control over them because they aren’t your main source of income. I always try out a side hustle and see if it works. If it doesn’t, then I figure out an exit strategy and stop that side hustle.

By making the short term sacrifice of working extra side jobs you will be able to increase your debt payments and ultimately save money in interest in the long run. Figure out what you can realistically manage and see how much you can make to move your debt free date closer.

3. It can create habits that you end up keeping.

When you’re paying off debt, of course you’re going to start doing things for the short term. At first they may be considered sacrifices, but I guarantee that you will eventually adopt some of these new things as habits.

For example, I know that I will always work multiple jobs. It’s just in my nature. I enjoy changing things up and doing different things. I think that’s why I like being a teacher, every day is always different. Eventually I won’t work as much, but I think I will always work extra jobs.

Also, at first my living arrangement was solely so that I could pay off debt. Now, I want to always make sure to live way below my means. This definitely means that I don’t plan on buying a big house, I enjoy small, minimal living now and I don’t plan on changing that.

The sacrifices at first that you create might just end up being habits that you create and end up enjoying. I am shocked by how much my life has changed since committing to paying off my debt. It’s amazing what you end up valuing in the long run when you have big goals.

Remember, the sacrifices you make are temporary.

Ultimately, the sacrifices you make are temporary and once you have reached your goal, you can change things again. What it comes down to is always having a goal you want to reach. This will help you to determine what you are willing to sacrifice.

If you want to reach your goal faster then going out to dinner, you may decide that night out isn’t worth it. The best part about personal finance is that it’s all up to you. You can do whatever you want and you need to decide if your goals are more important than certain things. What have you sacrificed to pay off debt?

Debt

Debt Free Update: $124,378 Paid Off!

Debt Free Update_ $124,378 Paid Off!

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

I feel crazy typing this, but now that I’ve been on this journey for roughly 3 and a half years, I feel so close to being debt free, even though I have $76,718 left. Maybe that isn’t crazy, but I know I’m no where close to being done, it just seems so much more manageable.

I remember when I hit my financial breaking point and absolutely freaking out about just affording my minimum payment on my teaching salary. Now I’m at the point where it’s no longer a stress in my life.

Of course, I still have about $1,100 as a minimum payment every month, but that’s a lot less than the $2,000 it was when I started. My monthly minimum payment would be $1,000 now, if I didn’t refinance.

Yes, I took about a $100 increase in minimum payment, sounds crazy right? But, this allowed me to get an interest rate of 4.97% instead of 7.05%, totally worth it in the long run.

Refinancing isn’t for anyone, but for me and my student loans, it was something I had been working to do for years. I am so happy to have a lower interest rate because so much more of my payment goes to the principal now. If you are considering refinancing your student loans, check out my post that outlines some questions to ask yourself before doing it!

Debt Free Update: Private Loans

I hate all of my student loans, but especially my private loans. I especially hated them when I had my old provider. I will say, I don’t hate them as much since I refinanced them with Earnest back in September 2018. They are awesome to deal with, listen to feedback and actually make the changes, and I am finally seeing actually movement in my pay off of them.

In September 2018, I refinanced $45k of my student loans, which was all of my private student loans. Now, I have $23,981 in private loans, I’ve paid off $21k in 7 months, just in my private student loans! This never would have been possible, if I didn’t refinance my loans, because I was paying so much in interest every month. If you are considering refinancing your student loans, you can use my referral link to get you $200 when you refinance!

Things are very up in the air for the second half of the year for me, my plan is to pay my private loans off by the end of the year. This goal will change depending on how things pan out after June.

Debt Free Update: Federal Loans

My federal loans are still on income driven repayment. I just renewed it and my payment is going up $50 to $300. This is actually a good thing because my loans accrue about that much in interest every month.

While focusing on my private loans, I have been paying the minimums on my federal loans, but making an extra payment every month to make sure the interest is paid off every month. The reason I do this is because I don’t want the unpaid interest to be added to the principal, making the loan increase. This will require me to pay even more in interest and even more in the long run.

This is why it is so important to understand these programs and stop making blind student loan payments. Your payment may be as small as $0 every month, which means your principal is going to increase on your loans. So, yes your loan is in good standing, but you are increasing your principal every single month!

My loan amount doesn’t really change much on my federal loans for now, I’m basically just paying off my interest every month. Right now my federal loans are $52,736. These are broken down in many smaller loans. Once I pay off my private loan, I plan to pay off my federal loans by avalanching the smaller loans based on their interest rate.

Debt Free Plan

I have been going very hard at my goal to pay off this debt as fast as possible. I’ve increased my income, moved back home with my parents, and cut my spending down. Currently, my debt free date is May 2021, which is incredible! It’s amazing what consistent choices over and over can do.

I’m not sure where my debt free journey will go by the end of the year. I have plans to move out, maybe get a new job, I’m okay to slow down my journey a bit to move out of my parents house. I have paid off so much debt, way more than I ever thought would be possible at 26 years old, that I’m okay with it all.

Right now, if I continue with my current plan, I will have just turned 29 when becoming debt free. My goal has always been to have my student loans paid off by my 30th birthday. Right now, I have a nice buffer of time on my side and I feel really good about where I am at with my finances. How is your debt free journey going?

Debt

Good Debt vs. Bad Debt: It Doesn’t Exist

Good Debt vs. Bad Debt_ It Doesn't Exist

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

You hear it constantly, people sharing what is considered good debt and what is considered bad debt. But, who ever decided what was good and what was bad? And I don’t know about you, but I tend to find different sources saying different ones are good and bad.

I also find that it’s bad in some situations, but good in others. Like, if you pay off your credit cards and never pay interest, then it’s good debt since you’re getting the rewards, but carry a balance and it is immediately bad debt.

This is what tends to bother me in the personal finance world, people creating these one set systems for people to use. Don’t get me wrong, I think it’s great to have a structure to follow when you’re first dipping your toes into your own personal finance.

It’s nice to have something to follow and guide you at first, but there is a very important word in the phrase personal finance, it’s personal! You need to create your own system eventually that works for you and your finances.

Why there is no good debt or bad debt.

Ultimately, the decision is yours to make what you consider good debt or bad debt. In certain situations, debt is a great way to achieve your ultimate long term goals. All debt is obviously not created equally and it needs to be treated that way.

Every person’s unique situation changes if a debt would be considered good or bad. In one situation the debt may be considered a good choice, but in another, it would be considered bad. This is why it comes down to you and your personal decisions related to your finances and your long term goals.

For example, I consider my student loans a bad debt choice. Most people would consider student loans good debt, but what it comes down to is if it was a good financial move. For me, my student loans totaled 4X the salary I got when I graduated, I couldn’t even afford my minimum payments and housing. If I lived in other places in the country, my salary would have been lower and my debt would have been 5X my starting salary.

This was absolutely a bad money move on my part. I didn’t know better and didn’t know how to manage my money or how to make college more affordable for me.

On the other hand, I recently bought a car and took out a car loan. The reason I did this was because it had a very low interest rate of 0.9% and I was able to put a significant amount down and had a trade in. The car is worth a lot more than my loan and the money I would have needed to cash flow this purchase will now be able to go towards my student loans.

You can’t look at debt as good or bad exclusively, rather look at it as a good money move or not to move you closer to your long term goals.

How to determine if it is a good money move to use debt.

What it ultimately comes down to is if it aligns with your long term goals and helps you to get there. If it’s going to be a burden on you and will not make financial sense for you, then it’s not a good move.

For example, I use credit cards. I have never carried a credit card balance and have always paid them off in full. I use them because it is easier for me to track, I can easily dispute charges and it’s not my current money I need (if I used a debit card and someone got my account info, those charges would take time to get refunded and ultimately be my own money I lost), and it gives me cash back.

I would consider this a good money move because I don’t pay any interest, I have the money set aside in my bank account before the purchase, and it gives me some cash back.

Another example is that I refinanced my student loans to get a lower interest rate. This made my monthly payments more, but it decreased the life of the loan and lower my rate from 7% to 4.97%. This ultimately saves me money in the long run in interest. If you want to check out Earnest, you can use my referral link to get $200 when you refinance!

Ultimately, it comes down to your values and how you view your personal finances. What I feel is a good money move, may sound ridiculous to you, and vice versus. You need to make each decision about your finances and make sure that it helps you to reach your long term goals.

If it prevents you or makes it more challenging to reach your goals, then maybe it isn’t a good money move for you. By understanding what your goals are and what you value, it will allow you to decide what are good and bad money moves. What are some of the big money moves that you have made? 

 

Debt

7 Secrets You Will Not Want To Know About Student Loans

7 Secrets You Will Not Want To Know About Student Loans

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Every since I wrote my post about blind student loan payments, I have been getting a ton of questions about student loans. It is crazy to me that student loan providers are allowed to do the things that they do. It’s absolutely terrible, which is why I think student loans are probably one of the worst debts.

There are so many things people don’t know about student loans, but they let 18 year olds sign their lives away to them. It’s insane! And I was one of them that unknowingly did it! But, I want that to change, I want every person that gets a student loan to know the reality of them.

They can be a tool to use to better your future, but they need to be taken out with education about what these debts really are. Student loans are unlike any other kind of loan, which can ruin people’s financial future.

Related posts:

4 Steps to Decide If Refinancing Your Student Loans Is For You

How Student Loans Impacted My Credit

A Honest Review: Round Up To Zero

How to Pay Off Debt on a Low Income

1. Minimum payments on student loans don’t need to cover all of the interest.

This is what separates student loans from most other loans. Most loans, you are at least covering the interest that accrues throughout the month. Student loans are completely different. You can be making your minimum payment, but not paying off your interest every month. This will cause your loan to grow and grow and you will never pay it off.

This is why you need to stop making blind student loan payments and check to see if you are paying off at least your interest every month. If you aren’t, you need to make a change in order to ever pay off your student loans.

2. Your student loan interest deduction on your taxes is making you lose money.

We all get wrapped up in tax deductions and sometimes it does financially make sense to make certain money moves that allow you another deduction. But, being able to deduct your student loan interest every year is not helping your financial picture.

I have heard so many people tell me they aren’t rushing to pay their student loans off because they get a tax deduction. You get to claim $2,500 every year, but add up how much you lose every single month to your student loans. Think about how much you’d be saving in a year if you just paid them off. I know for myself, I’d be saving about $40k, way more than the $2,500 I get to deduct.

3. Your family will still be responsible for your student loans if something happens to you.

There are some programs in place for federal loans and some private loans as well, but most student loans are not forgiven in the event that the borrower passes. The crazy part about this is that with most other debt, there is a tangible item attached to the debt. For example, if you have a car loan, your family can sell the car to help with the debt associated with it, similar to a house and a mortgage. With student loans, your education will not help pay for that cost if you pass.

This is important to keep in mind, especially if your parents or other family member cosigned your student loans.

4. Your wages can be garnished, if you’re delinquent on your student loans.

This is a vicious cycle. You can’t afford your monthly payment on your student loans, your wages are then garnished. If a recent graduate has an entry level job and can’t afford their monthly payment, it will be hard to get ahead when their wages are garnished. This is super important to keep in mind if you’re struggling to make your payments each month.

If you are delinquent, they can also garnish any social security benefits, disability benefits, or federal refund checks.

5. In some states, you can lose your driver’s license for not paying your student loans.

This is different in every state, but it’s something to keep in mind. This is yet another vicious cycle. If you lose your driver’s license, it then may be hard for you to get to work, if you live in an area that doesn’t have public transport.

6. In some states, you can have your professional license suspended for not paying your student loans.

This would prevent you from working in the field that you took the student loan out for. Which would prevent you from making a payment on your student loans potentially. This would prevent you from turning things around and getting back on track to paying your student loans.

7. You can be sued for not paying your student loans.

In the event that you are not paying your student loans, you can be sued by the company. This happens much more frequently with private student loans because they don’t have programs in place to help borrowers afford their monthly payment. However, they also don’t have programs that can grow your student loans, like I mentioned in number 1.

I encourage all of you to get educated about your student loans. Ask questions, do research, know what your student loans mean. If you haven’t taken any out yet, but are thinking about it, understand the reality of them and consider alternate plans. If you’re struggling to make your payments, get on a budget and get on a better financial path, so you don’t have to deal with any of what I mentioned above. How have you helped yourself to learn more about student loans?