That was totally us for the past two years, but the day has finally come… we no longer have any student loan debt!! #hallelujah
Pushing the submit button on that final payment was one of the most thrilling moments of my adult life thus far. A little over a year ago, my husband and I sat down and put a plan together to get out of student loan debt and pay off my car as soon as possible. He had worked super hard to pay off all of his undergrad debt before we even got married and somehow I convinced him to marry me even though I would be entering into it with over $30,000 in student loan debt from graduate school. What a guy 🙂
By no means are we perfect with our finances or have everything figured out, but I know many people our age and even older are still dealing with student loans and a few of the things we’ve done or used I tell people about all the time anyways, so I figured I’d just write it down in hopes that maybe it will help others.
So here we go, my top 5 tips for getting out of debt:
#1: Set a budget and stick to it.
My absolute favorite thing we ever did after we got married last summer was set up our budget. I highly recommend using some type of app or website to keep track of everything. We’ve been using Mint and absolutely love it! I tell everyone about how much I love it all the time! It puts all of your accounts in one place so you can see your checking accounts, savings accounts, your student loan account, car loan accounts, credit cards, house loan, as well as your house and car values, plus your credit score all on one website. It’s easy to customize the categories you want to include and see how you’re doing with the color coded tracking. Based on what you put in for your income every month and your expenses, it will subtract that and tell you how much you should be saving each month. This was the key for the rest of my tips.
#2: Write your goals down.
Once we knew how much we ideally should be saving each month, we set out to create our goals. For us, the easiest way to do this was to create a spreadsheet. We put each loan in its own column and then listed the months down the rows. The first row started with the current amount remaining on that loan and then using that ideal savings amount and the next two steps, we planned out how quickly we thought we could pay off each loan. This gave us a general timeline to go off of to help us stay on track. Of course, certain months something would come up like a trip or needing new tires that weren’t necessarily in our budget that would throw things off a bit, but it at least helps to have a guide to reaching your goals.
#3: Start with your highest interest rate loan.
Once our spreadsheet was created, we looked at the interest rates for each loan and started putting extra towards the highest one. For us, my student loans were actually three separate loans with one being like 6.15% interest and the other two being around 5.5%, along with my car loan. So, each loan would have some money going towards it each month just from its regular payment, but then at the end of each month, we’d always keep a certain amount in our checking account and any extra in the account would go straight to that highest interest rate loan (ideally that difference in the income -budget amount I mentioned in step 1), plus any additional income that month. Yearly bonus – student loans. Tax return – student loans. Extra paycheck – student loans. Were there more fun things we would’ve liked to do with that money, absolutely, but we had a goal and we stuck to it.
#4: Keep snowballing.
Once that highest interest rate loan is paid off, roll that payment into the next highest interest rate loan. Dave Ramsey talks a lot about the idea of snowballing and it really does work. It’s easy to fall into the temptation to say “oh look, we now have $200 extra to spend on something way more fun”, but rolling it in to the next one just keeps the momentum you’ve started and will get you to your goals even faster. If you find yourself getting frustrated, sometimes it’s okay to pay off a lower interest rate loan first that’s a smaller amount to keep you feeling like you’re making progress. For instance, after we paid off my high interest rate student loan, the other three were all pretty similar in interest rates, so we knocked off the $1,500 dollar one next mostly to just get it out of there. Snowballing debt is the quickest way to pay things off and it’s worth it in the long run.
#5: Find what motivates you.
My final tip is to find what part of this whole thing motivates you. Do you want more disposable income each month for traveling? Are you saving up to buy a house? Being able to travel before we have children was a large motivator for me, but honestly the biggest motivator was seeing how much we were paying in interest. I got a little bit neurotic with our spreadsheet and started looking at my student loan account each day for a bit to see how much interest was accruing each day. When we first started, it was probably over $4.50 per day – no joke. There are so many things I would rather spend that money on each day and even if that doesn’t seem like much, that’s $135 a month or $1,620 a year that is literally just being thrown away. Had we kept just paying the minimums until like 2025, I don’t even want to know how much we would’ve paid in interest over that amount of time.
So there you have it, my top 5 tips for getting out of debt. Again, we’re not perfect and everyone’s finances are different, but I hope at least something I shared was helpful. If you have other ideas of things that have worked for you or questions, please share in the comments! I love chatting about this type of stuff with people!