How to pay off my $33K student debt within 18 months of graduation by mwink

"Feels amazing to finally put this big audacious personal goal to bed :D"

How I did it:

This is my journey toward clearing $33K student debt in 18 months. I graduated mid-recession and moved to an expensive city to start my job.

1) Reality Check Pt. 1 - Start with Net Worth
Take a hard, honest look at where your finances stand today. One measure you can use is net worth (your assets vs. your debts). What you learn will surprise/embarrass/scare you, but knowledge is power. Where do you go when you don't know where you are today? A helpful website that I use to track my net worth is NetWorthIQ.com. Users can post monthly updates and the site will spit out your personal trend graph. It's both eye-opening and motivating to see how you are doing vs. yourself and your peers!

2) Reality Check Pt. 2 - What's Your Timeline?
When I first graduated, I had to juggle between coughing up one-time expenses (got my own apartment in a new city) and prioritizing where the rest of my money would go. And then there was the whole debt situation. I decided to give my student debt a hard stop at 18 months after graduation for 3 reasons: i) The interest on my loan, according to the fine print, hikes up to 11% after 24 months out of school (gross!), ii) I'm very blessed to have a job that can support my ambitious timeline (note: a "good" salary is NOT a requirement to achieving this goal), iii) It's a compelling personal challenge that I was willing to accept, if not just for the bragging rights! ;-D

3) The Balancing Act - Savings vs. Debt Elimination
The age old question. Should I save for retirement or pay down my debts? I chose the latter. The counterintuitive explanation is that paying off debts is a higher return on "investment". The interest I had to pay on my student debt (9.5%) far outweighed the measly interest I would earn from my high interest savings account (1%). It was a no-brainer for me - I needed to aggressively funnel my money toward eliminating debt. The payout is 9.5 to 1.

4) Make It Fun! - Every Little Bit Counts. Hold Yourself To It!
Debt elimination can be fun! The steps above should hopefully give you the tools to create and finalize your timeline. I cannot stress enough how every little contribution matters. And please forgive yourself for little blunders along the way. They will happen. The important thing is to bounce back - be flexible, reassess your new situation and get back on track!

Good luck!

Resources:

Microsoft Excel
A calendar
Self-discipline


3 people found this helpful
 

Dec 18, 09:50AM PST | 6 comments | 42 cheers


Comments:

Cherry87 mark it up, knock it down

Congrats!

Dec 18, 03:52PM PST | Thread | Respond to this

mwink Be so good they can't ignore you.

Thanks Cherry!

Dec 19, 08:49AM PST | Respond to this

jacca19 just started postcrossing!

congrats! that was very motivating. Although I am not in the same position as you, since after my undergrad, I decided to continue on to grad school which thankfully will be done by the end of the summer. It’s hard when I help my parents pay half of my grad school classes. Ever since I graduated from undergrad, I have been putting aside 150 each check which rung up to 300 a month and have already paid over 1,000 dollars back even though I have a defferment from still being in school. I too, thought like you about the interest, thats why I am trying to pay as much as I can now. Again congrats!

Dec 18, 09:07PM PST | Thread | Respond to this

mwink Be so good they can't ignore you.

That is awesome, Jacca!

$300 a month shows great discipline. I started out with around that amount per month too, and would try to “over-contribute” whenever I could.

Take full advantage of that deferment! I hope this means there’s a “grace period” where interest is low to minimal. This is the best time to reduce your principal before the repayment schedule kicks in!

You are on your way to being debt-free! Congrats! And good luck!

Dec 19, 08:55AM PST | Respond to this 2 cheers

Triniprincess ...step by step!

Congrats!!!

And such a great entry! Informative.

Dec 21, 06:37PM PST | Thread | Respond to this

mwink Be so good they can't ignore you.

Thanks Trini!

Dec 21, 09:18PM PST | Respond to this


mwink has gotten 42 cheers on this entry.

 

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