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Feeling overwhelmed by student loans? Discover the game-changing actions I took on my journey to financial freedom.
Student loans significantly influence life decisions, playing an important role in choices like buying a home or starting a family. I speak from experience – after earning my MBA, a looming $131K student loan was waiting for me at my doorstep, which felt like my life was over.
Tackling any form of debt is not an easy feat, especially without a solid game plan. After crying for what felt like days and weeks, I made the determined decision to confront this challenge head-on.
By applying the strategies I’m about to share, I successfully paid my student loans in a mere 30 months! Yes, you read that correctly – I whipped out my $131K debt in just 2 years and 6 months!
After learning about the strategies needed to pay off debt, you are going to feel like you can tackle personal finance, small wins, and how to say NO!
This post is all about how to pay off student loans.
FAST-TRACK TO FREEDOM
1. Learn About Personal Finance
This might seem obvious to some but learning about financial literacy is a must! Frequently, we hear words like debt, budget, credit cards, and 401K, yet many of us don’t understand what they mean and fail to explore these concepts further.
Early on in my journey to freedom, I stumbled upon a book that saved my life, I’m not joking. The book is called The Total Money Makeover by Dave Ramsey. This book offers the simplest, most straightforward game plan for a total financial transformation, covering personal finance fundamentals. It’s an easy read, I read it in 1 day, and I felt a shift in my perspective on money. I gained a solid understanding of basic finance and discovered new ways to tackle not only debt but also my retirement and emergency funds. It was game on!
One of my favorite quotes from the book is “Live like no one else, so later you can LIVE and GIVE like no one else!”. This was a mantra that I repeated to myself especially when situations got tough.
Most importantly, having financial literacy holds immense importance in empowering you to make informed and effective decisions about your money. It gives the knowledge to make smart financial decisions from budgeting to investing to debt management. Understanding these concepts will enable you to make better decisions aligned with your personal and financial goals.
2. Monthly Budget
Keeping track of your monthly expenses is crucial to getting out of debt. This exercise is truly eye-opening, revealing insights into your spending habits, such as the significant amounts spent on dining out and shopping.
Starting this process might be challenging at first, especially since it involves cutting expenses you enjoy. However, you must understand the true extent of your financial resources and how they are allocated.
I initiated the process by creating a simple Excel tracker. First, I recorded my income and proceeded to deduct all essential expenses, including rent, utilities, groceries, gas, cellphone bill, and naturally, my monthly debt payment. Once I incorporated all the essential expenses, I calculated the remaining amount and allocated it to other expense categories until my income reached 0.
This is known as a zero-based budget. In a zero-based budget, every dollar has a purpose and is allocated to a specific category, leaving no money unassigned. This gives you clear financial priorities and prevents you from overspending.
Equally important, a zero-based budget provides a structured approach when paying off debt. It allows you to allocate extra funds toward debt repayment, accelerating your journey to becoming debt-free.
3. Get A Financial Advisor
Getting a trusted Financial Advisor who dedicates time to explain and teach you is worth every penny. My Financial Advisor played a pivotal role in refinancing my student loan, liberating me from a detrimental variable interest rate and relieving my mother of her role as a co-signer, a burden that was weighing heavily on me.
Engaging a Financial Advisor brings numerous benefits in managing debt, including customized debt repayment plans, budgeting guidance, and negotiations with creditors. A good advisor also provides emotional support, helping individuals create a sustainable path to debt-free living.
Additionally, perhaps one of the most significant benefits is the peace of mind that comes from having a professional guide you. Knowing that your finances are in capable hands allows you to focus on other aspects of your life.
4. Celebrate Small Wins
You must celebrate small WINS! Celebrating small victories provides a motivational boost and creates momentum. Additionally, it creates a positive feedback loop, encouraging you to persevere and strive for more significant accomplishments.
The celebration of my choosing was popping a bottle of champagne for every significant milestone I achieved. In addition, I added a post-it note with the words “DEBT FREE 2021” to the top of the last bottle, serving as a constant reminder of my goal. The life-changing moment came on July 30, 2021, when I popped the Veuve Clicquot, I was finally FREE!
Without a doubt, celebrating small wins allows you to track your progress effectively. Regular acknowledgment of achievements helps in assessing goals, adjusting strategies, and staying on course.
5. Live At Home Or With A Roommate
This is a tough one, especially if you’re already independent. In my situation, returning home became a necessity as my income couldn’t cover both my rent and the substantial student loan payments. Fortunately, I am blessed with a close relationship with my mom and the expenses I paid for were utilities, groceries, and miscellaneous.
Without a doubt, sharing living expenses with a roommate can significantly reduce financial burdens. Moreover, lowering living costs will allow you to allocate more funds towards debt repayment. Helping accelerate progress towards your financial goals and achieving debt-free milestones.
Similarly, reducing living expenses creates opportunities to save money. Whether building an emergency fund or saving for future goals.
Last but not least, returning home or living with a roommate can strengthen relationships. Sharing living spaces fosters a sense of mutual support and shared responsibilities.
6. Increase Your Income
You need a bigger shovel! Whether you secure a promotion, transition to a new job, or get a side hustle, increasing your income will help you accelerate your debt-free journey.
This concept proved pivotal for me; I worked long hours and volunteered for projects to secure promotions. Consistently advancing each year boosted my income, accelerating my debt-free journey. Annual and Christmas bonuses further fueled my momentum, particularly since I didn’t have the time to get a side hustle.
Increasing your income is crucial in expediting the debt repayment process and achieving financial freedom. Having a higher income allows for increasing monthly contributions towards debt repayment, enabling you to pay off outstanding balances more quickly.
More importantly, you can tackle high-interest debt more aggressively, minimizing the accumulation of interest over time. This leads to overall cost savings and a quicker path to becoming debt-free.
7. Learn How To Say NO!
Missing out is hard but actively saying no is crucial on the debt-free journey. If you’re committed to paying off your student loans, it requires saying the word NO, A LOT!
Understanding the importance of my goal, I actively declined numerous invitations from friends to dine out, go on vacations, and even weddings. I was laser-focused, allocating every extra dollar toward my student loan. While it could be lonely at times, the ultimate payoff made it all worthwhile.
Turning down invitations helps minimize spending on social activities which enables you to prioritize your financial goals. Rather than attending costly events, suggesting or participating in alternative, budget-friendly activities allows you to maintain social connections without compromising your financial goals.
Similarly, in a world where you can buy anything with just one click, discipline is key when it comes to shopping. Consistently saying no cultivates financial discipline, reinforcing the habit of making intentional choices that align with your debt repayment objectives.
8. Limit Your Credit Card Use
This point is controversial especially when it comes to the rewards you get from credit cards. I personally only use 1 credit card and I pay it off every day (no joke). I’ve never paid interest on my card and I’m never going back to debt.
By limiting the use of a credit card or eliminating it, you avoid the temptation to get into more debt. Credit cards often carry higher interest rates, minimizing their use means less money spent on interest payments.
Having fewer financial accounts, especially those associated with credit cards, simplifies financial management. This clarity enables you to focus on budgeting and allocating funds strategically towards debt repayment.
Above all, relying on cash (CASH IS KING) or debit cards encourages more responsible spending habits. Without the safety net of credit cards, you’re more likely to make budget-conscious decisions.
9. Focus Intensely On Achieving The Goal
As a driven and self-motivated person when I have a goal in mind I become obsessed with it. I add it to my vision board, visualize it during meditation, and talk about it non-stop.
Being hyper-focused on your goal cultivates a heightened sense of motivation, driving you to stay committed and dedicated to the debt repayment journey.
Having a singular focus on the goal helps in channeling your financial resources more efficiently. Directing them towards debt repayment instead of non-essential expenses.
10. Student Loan Refinancing
Refining my student loan was a game-changer for me. As I mentioned on the 3rd point my initial loan had a variable interest (the importance of financial literacy) and my mom was a co-signer. The only way to get out of that mess was to refinance my student loan.
Having your loans refinanced can help you secure a lower interest rate which can result in a reduction of your monthly payments and accelerate the overall repayment process.
Furthermore, refinancing allows the consolidation of both federal and private loans into a single private loan. While this may result in the loss of federal loan benefits, it can simplify the repayment process for some borrowers.
11. Don’t Hold Your Breath For Student Loan Forgiveness Programs
I wouldn’t wait to see if the government is going to forgive your student loans, this can take years while your interest keeps on climbing.
The taste of Freedom is too amazing to sit around and wait to see if someone else is coming to rescue you. Therefore, block the noise and stay focused on paying off your debt. Freedom is on the other side of discipline and consistency.
In summary, the key to paying student loans faster is a combination of strategic financial planning, budgeting, and consistent efforts to allocate additional funds toward repayment. Choose strategies that work best with your financial situation and goals for the most effective results.
I hope these strategies help you pay off your student loans or any type of loan faster. Stay focused and motivated!