When I read “Get out of Debt” advice, I often get frustrated at its tone-deafness and overall uselessness. Telling people to give up daily Starbucks coffee or stop paying for cable packages is tired, outdated advice that ignores most people’s financial reality. I’ve never been able to afford $3 (or more) a day for coffee, and I don’t know anyone under forty who ever has paid for cable TV, unless they’re an avid sports fan. In that case, they aren’t going to give that up due to a cable TV subscription being way cheaper than going to sports bars all the time.
I also get tired of financial advice that assumes that all debt is from bad spending habits. The only debt I have is from student loans, which stemmed from me not really understanding the gravity of thousands of dollars of debt when I was in college. I definitely could have spent my money better, but irresponsible spending is not the reason I left college owing more than $50,000. That has more to do with our society pushing college as a necessity, but making it unaffordable for most people.
But even though I refuse to be shamed by condescending budget advice, I do recognize that my debt situation stems from personal choices, and that to get out of it, I must make better decisions. My experience with student loans has allowed me to spot patterns in my behavior, and in the world, that can help me avoid future debt. Here are some of the lessons I’ve learned.
Always Meet Early Deadlines
When I was in college, my student loans gave me the opportunity to pay the interest as it accrued, or leave it until later. Of course, the financially savvy option is to pay as you go. Of course, I didn’t act frugally. I let the interest accrue until I was done with college, and those thousands of dollars in interest got added to my principal loan amount, and now are accruing interest of their own. Many private loans — such as those for cars, computers, and furniture — start off as interest-free, but if you don’t pay off the whole balance by the time the interest-free period is over, you end up with a bunch of fees. So, always meet those early deadlines, pay off interest before it becomes principal, and remember, the faster you pay off a loan, the less interest you pay on it.
Money Will Always Disappear
During my first year after college, I just made the minimum payments on my student loans. Once I did my taxes and saw how much interest I had paid, I knew I needed to hit those loans full-force. I decided to attack my highest interest student loan. For six months, I attempted to limit my spending and put money aside. I saved about $1,000. I kept having unexpected car repairs, gifts for family, and other expenses pop up. So, I changed tactics. I went through the process of making a detailed personal budget and looked at the money I had coming in versus the money I had going out. In theory, I should have had an extra $700 a month. So, I upped my monthly automatic payment on my high-interest loan by $500. I still had enough wiggle room to pay unexpected expenses, and I finally started making progress. Basically, the lesson here is there always will be things that come up and take your money. When you allocate it for specific things, you’re much more likely to make progress on your financial goals than if you put it away in general savings.
Plan for Complications
Even though I wanted to hit my student loans full-force, I waited until I had more than $1,000 in savings to start. That drastically helped when car repairs needed to happen. I have not kept that account consistently at $1,000, but when it dips under that amount, I focus again on building it back up. I also have started making a point of doing home repairs and paying for other irregular expenses immediately, when I have the money, rather than putting it off until later. This reduces the chances of a bunch of expenses popping up all at once. When I got married, not much about my daily life changed, but it did affect my finances. Many of my friends have struggled with the transition of going back to school, while also balancing finances and work. Try to plan as much as possible, and consider what you’ll do when unexpected expenses come up. It’s not always possible to be completely prepared, but having thought about your options will reduce some of the stress when life inevitably happens.
Life Won’t Wait
Depriving yourself now to have more later isn’t the answer. Focus on building sustainable habits and creating what you need to be happy. Part of this is learning what makes you happy and focusing only on that, eliminating the meaningless “extras” that commercialism tells us we need. You can learn more about changing your mindset instead of setting arbitrary decluttering goals in How to be a Fearless Minimalist in a Cluttered World.
Even though I have a long journey left on my student loan payoff, I did meet the milestone of paying off that high-interest loan. I also feel much more confident about my financial outlook when my loans are paid off, because I have these guiding principles that I’ve learned from this journey. In some ways, I feel like I’m in a better place with my tens-of-thousands of dollars of debt than my friends with just $6,000 in consumer debt. At least I have strong financial habits to help me continue making progress.
What financial patterns have you noticed that have helped in your debt payoff journey? Share in the comments!
Jeriann blogs about life, finances, and books at dairyairhead.com. She’s forever trying to find the balance between quickly paying off her student loans and not burning out.