Before I can rightfully tell you about how I paid off $10,000 of debt in 6 months, I need to back up a little bit.
Until the summer of 2016, my partner and I were living primarily off my income. She worked part-time here and there, but was largely focused on her undergraduate degree program. At that point, she was accepted into another program that would pay for her Master's Degree in Education while simultaneously employing her as a full-time, full-salaried, teacher. We were already accustomed to living off my income only, so when we started school that fall (I also work as a teacher), we decided not to change that part of our financial picture.
Upon arrival of her first paycheck in September, we paid off the remaining balance of one of my two private student loans. After paying off my credit cards the previous year, I had been hurling every extra dollar at the smaller of the two private student loans. I had it down to about $1200, when she got that paycheck, and we used that check to eliminate it entirely. We had decided to continue on using her paychecks to eliminate debt, and mine to live on. Over the next few months, we saved her paychecks in order to buy a new roof on our rental property, which I am proud to say we paid for in cash!
That brings us to January. In January, I had one remaining private student loan with approximately a $10,000 balance on it. We decided that we wanted to pay off that remaining private student loan by the time school let out for the summer (for us that's the end of June), so June 30th became an absolute mission.
Now, I don't know about you, but for me, paying off ten grand in six months is already difficult enough. Add to that they chaos that is this year. By that I mean, this is the year that everyone we love most has some sort of monumental event happening: weddings (2), graduations (2), monumental birthdays (2). We knew that we were going to have to miss some of these occasions, but even so, the fact remained that we were going to be traveling three times during that time frame.
This is where my partner is such a huge asset. I get so fixated on eliminating my debt that my tendency is to ignore some of these other things. She does a great job of helping me to work those items in without detouring much from our path. For example, we probably could have gotten the loan paid off by the end of April if we weren't traveling three times during that time frame. So, we settled on June 30th as a date. Ultimately, I just wanted it done by summer break, so that worked just fine.
We budgeted $2000 per month starting in January ($1000 per paycheck). That needed to include my $10,000 student loan, two trips to Portland, Oregon and a trip to North Dakota. That gave us $12,000 from paychecks to work with over the course of 6 months. I decided to add another $1000 of my income from a side gig to this cause. Since we decided this as early as January, it was really easy to break up the $13,000 into monthly allotments. One month we would pay $1000 to the loan and the other $1000 to one of our family related visits, and the next month we would pay a full $2000 to the loan. We decided to alternate so as to feel like we were steadily making progress on both fronts.
This strategy worked really well for us. I think it helps that we view our money as being in "buckets." Each bucket has a specified purpose, and gets a specific amount of money added to it. Now that we have no more private student loans, we will devise a new plan of attack for the next priorities on our list.
For further reading, see also:
Paying Off Private vs. Federal Loans
Private Student Loans: How I got into debt in the first place!
If you or someone you love are working hard to pay off student loan debt, and feel that refinancing could help I recommend using LendEDU (affiliate link). LendEDU is one of my sponsors, and has a tool that helps people to quickly and efficiently compare several student loan refinancing companies in order to evaluate which company can offer you the best deal. Utilizing their tool doesn't necessarily mean you have to go through with the refinance, but it will help you to gather information to make an informed decision.
LendEDU is a company with which I have an affiliate marketing relationship. I earn a commission when an individual clicks through my link and uses LendEDU to gather information about refinancing student loans.
Sense with Cents chronicles our journey using Law of Attraction while pursuing Financial Independence, and the belief that everyone can win with money, We believe that mindset, emotion, and financial knowledge are the keys to success. All opinions are our own and do not constitute financial advice. Although this blog also contains affiliate advertisements and links, again, all opinions are our own. See disclosure page.
Friday, June 30, 2017
Tuesday, June 27, 2017
5 Ways to "Spring Clean" Your Finances
Summer break is about to begin. This is the point in the year where I have two months off, and when my "Spring Cleaning" frenzy begins. I know it's not Spring, but it's when I have time to do a massive overhaul in my home. I make donation piles, recycle piles, "sell it" piles; I clean, organize, and rearrange. When I take care of things I had been previously neglecting, I feel great. I feel like I am in total control of my environment. I feel like a strong, powerful person. That being said, there are some relatively easy things that get neglected in our financial lives, that could use a little a little housekeeping as well.
Here are 5 Ways to "Spring Clean" Your Finances:
1. Check your beneficiaries.
Life events happen, and it's frequently forget to update our beneficiaries. This relates to banking accounts, insurance policies, investment accounts, retirement accounts, etc. For example, do you really want your ex-husband (or ex-wife) to be the one to inherit your house or 401k if something should happen to you? Likewise, would you want to leave your long-term without a dollar to their name or a home because you forgot to take your brother's name off the beneficiary section of some paperwork? If you have the paperwork filed away somewhere, that's great. Otherwise, it's a quick phone call away. Just call the financial institution, insurance company, etc. and ask them to look up the current beneficiary of your account(s). If you need to make any changes, they can send you a form. It's as easy as that.
2. Rollover your old 401k.
It's hard to know what you have when it's all over the place! It's time to dig out the old statements you've been getting from those various investment firms, and deal with them. Besides, you'll likely have better options moving out of the old company's retirement plan, and into an IRA. If you already have a traditional IRA set up, you can roll the funds over very simply. You just fill out a roll over form. If you don't have and IRA yet, you will need to open one. You can do this online at any discount brokerage firm. Remember, if you contributed to your 401k using pre-tax dollars, you will roll it into a traditional IRA. If it was a Roth 401k (meaning you had the taxes withheld already), you will roll it into a Roth IRA. For those of you that cannot find those old statements, a quick call to the HR department of your former company should get you moving in the right direction.
3. Review Insurance Policies.
Assuming you already took step one, you should have your beneficiaries squared away. However, there are other things you should check. First off all, you need to be prepared to check on all of the various types of insurance you have: renters, car, home owners, life insurance, etc. Make sure you have the appropriate level of coverage for your situation. Also, for types of insurance that come with a deductible, double check what exactly that deductible is, and adjust as needed. While you're at it, you could go the extra mile, and see if you qualify for any rate reductions or discounts.
4. Check your Overdraft Protection.
Either visit or call your bank or credit union. Find out if you even HAVE overdraft protection (ODP). Overdraft protection is when the bank or credit union transfers money from one of your other accounts in order to cover any check or debit that you didn't have funds to cover from your checking account. While that shouldn't be happening to you, the truth is that we all make mistakes, and I don't know about you, but I sure want my check or debit to be honored and paid when it hits my account. If you don't have ODP, and you are short on funds one of two things will happen. Either the check or debit will be paid, your account will be drawn negative, and you'll be charged a fee (usually pretty high, close to $40 even), or the check or debit will be rejected, and the person or merchant won't get paid (embarrassing and potentially costing you a fee on their end). If you set up overdraft protection, the bank or credit union just moves your money around for you and charges a much smaller fee. My credit union takes the money from my credit card and doesn't charge me any fee at all. I just have to pay the interest that collects on the card. Since this rarely happens, and I pay it back as soon as I catch my error, this typically only costs me a few cents. If my credit union transfers the money from my savings, they charge me $5. This is still better than the near $40 for an NSF fee (non-sufficient funds). So, your job is to say "Do I have ODP? " if not get it, if so continue with "Where will the money come from if my ODP kicks in? What is the fee for it?" Then, you make any adjustments necessary taking into account minimizing fees, and making sure the appropriate people in your world get paid.
5. Review your Budget.
You did a great job of creating a budget using the 50/30/20 Budget System, but you realize you need to adjust your categories to account for something you hadn't previously, or to adjust for that credit card you paid off and no longer owe. Take a look at the budget. This is a living, breathing, and ever-changing document. Make sure the following items are still relevant and up-to-date: categories, goals, and dollar amounts. You may need to add or subtract categories. You may have recently added a new goal, and your budget needs to reflect that change. Also, make sure your dollar amounts assigned to each category make sense given your current scenario.
Just try to complete one of these tasks per day, and in one week's span of time, you will feel great about your newly cleaned financial house!
Here are 5 Ways to "Spring Clean" Your Finances:
1. Check your beneficiaries.
Life events happen, and it's frequently forget to update our beneficiaries. This relates to banking accounts, insurance policies, investment accounts, retirement accounts, etc. For example, do you really want your ex-husband (or ex-wife) to be the one to inherit your house or 401k if something should happen to you? Likewise, would you want to leave your long-term without a dollar to their name or a home because you forgot to take your brother's name off the beneficiary section of some paperwork? If you have the paperwork filed away somewhere, that's great. Otherwise, it's a quick phone call away. Just call the financial institution, insurance company, etc. and ask them to look up the current beneficiary of your account(s). If you need to make any changes, they can send you a form. It's as easy as that.
2. Rollover your old 401k.
It's hard to know what you have when it's all over the place! It's time to dig out the old statements you've been getting from those various investment firms, and deal with them. Besides, you'll likely have better options moving out of the old company's retirement plan, and into an IRA. If you already have a traditional IRA set up, you can roll the funds over very simply. You just fill out a roll over form. If you don't have and IRA yet, you will need to open one. You can do this online at any discount brokerage firm. Remember, if you contributed to your 401k using pre-tax dollars, you will roll it into a traditional IRA. If it was a Roth 401k (meaning you had the taxes withheld already), you will roll it into a Roth IRA. For those of you that cannot find those old statements, a quick call to the HR department of your former company should get you moving in the right direction.
3. Review Insurance Policies.
Assuming you already took step one, you should have your beneficiaries squared away. However, there are other things you should check. First off all, you need to be prepared to check on all of the various types of insurance you have: renters, car, home owners, life insurance, etc. Make sure you have the appropriate level of coverage for your situation. Also, for types of insurance that come with a deductible, double check what exactly that deductible is, and adjust as needed. While you're at it, you could go the extra mile, and see if you qualify for any rate reductions or discounts.
4. Check your Overdraft Protection.
Either visit or call your bank or credit union. Find out if you even HAVE overdraft protection (ODP). Overdraft protection is when the bank or credit union transfers money from one of your other accounts in order to cover any check or debit that you didn't have funds to cover from your checking account. While that shouldn't be happening to you, the truth is that we all make mistakes, and I don't know about you, but I sure want my check or debit to be honored and paid when it hits my account. If you don't have ODP, and you are short on funds one of two things will happen. Either the check or debit will be paid, your account will be drawn negative, and you'll be charged a fee (usually pretty high, close to $40 even), or the check or debit will be rejected, and the person or merchant won't get paid (embarrassing and potentially costing you a fee on their end). If you set up overdraft protection, the bank or credit union just moves your money around for you and charges a much smaller fee. My credit union takes the money from my credit card and doesn't charge me any fee at all. I just have to pay the interest that collects on the card. Since this rarely happens, and I pay it back as soon as I catch my error, this typically only costs me a few cents. If my credit union transfers the money from my savings, they charge me $5. This is still better than the near $40 for an NSF fee (non-sufficient funds). So, your job is to say "Do I have ODP? " if not get it, if so continue with "Where will the money come from if my ODP kicks in? What is the fee for it?" Then, you make any adjustments necessary taking into account minimizing fees, and making sure the appropriate people in your world get paid.
5. Review your Budget.
You did a great job of creating a budget using the 50/30/20 Budget System, but you realize you need to adjust your categories to account for something you hadn't previously, or to adjust for that credit card you paid off and no longer owe. Take a look at the budget. This is a living, breathing, and ever-changing document. Make sure the following items are still relevant and up-to-date: categories, goals, and dollar amounts. You may need to add or subtract categories. You may have recently added a new goal, and your budget needs to reflect that change. Also, make sure your dollar amounts assigned to each category make sense given your current scenario.
Just try to complete one of these tasks per day, and in one week's span of time, you will feel great about your newly cleaned financial house!
Sunday, June 25, 2017
Private Student Loans: How I got into debt in the first place!
In February of 2004, I started a journey that would change my life. I moved to New York City, from Portland, Oregon, to study at a special musical theater conservatory program. The program lasted four semesters, and not only taught me the essential skills needed in the acting world, but also the professionalism that goes with it. In many ways, that education was one of the best choices I have ever made because nowadays, I am extremely confident in my abilities as a singer, actor, and director. I can thank these fine folks that I train with for my abilities and at least in part, my confidence.
This amazing education also came with a hefty price tag. I was granted a substantial scholarship, and took out the maximum allowable amount of federal student loans. Despite all of that, I still needed to come up with an additional $24,000. Well, I certainly didn't have it. So, I took out a private student loan. That is pretty much what all of the students at my conservatory were doing, and it didn't occur to me that this would be a problem. In the Summer of 2005, I graduated from the program. I was living in a cute little neighborhood in Brooklyn. I had roommates, worked as three part time-jobs: one as a personal assistant to a retired actress, a substitute teacher, and a waitress (NYC, actress, waitress--of course that happened)! I loved my jobs, my roommates, my apartment, and for the most part, my life. After the first 6 months, it came time to start repayment on the loans. The private loan wouldn't let me defer like the feds would... Okay, they WOULD, but I could only get 12 months of deferment over the life of that loan, and wanted to save that up for a real emergency, so I started paying them back. The student loan company set me up on a 20 year loan repayment schedule, so that I would have a payment that I felt I could afford.
The loans (there were actually 2 of them) were at a variable rate, that decreased over time, working entirely to my benefit. For that, I am incredibly thankful because it could have gone the other way and been a huge disaster. They hovered around 3% for the majority of the time I was in repayment. This is actually lower than the rate I pay on my federal student loans. Regardless, a variable interest rate is a dangerous thing because the lender can give you notice of a rate hike at any time, which could change your payment amount rather significantly.
I spent the first eleven years only paying the minimum amount on my loans. I would typically round up to the nearest ten dollars, but I really wasn't making enough to be able to pay much more than that. Finally, after eleven years of repayment, my financially world changed significantly. I started making a lot more than I ever had before. Rather than allowing lifestyle inflation to take over, I took the extra money and applied it toward my debts. I wiped out credit card debt first. Once that was done, I decided to focus on my private student loans.
June 30, 2017 marks the final payment of my private student loan debt. On one hand, I feel hugely victorious. I am finally free of that particular obligation. On the other hand, it shouldn't have taken me 12 years to do it. I allowed myself to fall prey to a student loan company "offering me relief" in the form of an extended repayment plan. While, I don't let it get me down, or even feel bad about what happened in the past, the truth is that I should have worked harder to afford a higher payment in order to be rid of the debt sooner. This private student loan has cost me thousands of dollars in interest! The idea of paying thousands in interest makes me feel pretty sick, but at least I didn't really extend it to 20 years! That would have cost me so much more! The reality is, while it cost me a lot of money in interest, I was successful at shaving 8 years off of my original 20 year repayment plan.
To read more about my final push to slay the private student loan dragon once and for all, read How I paid off $10,000 of student loan debt in 6 months.
For those of you that are working on repaying student loans, my sponsor, LendEDU (affiliate link) has a comparison tool that might help you to decide whether or not a refinance makes sense for you, and if so, which company might provide you with them best deal for your situation. By following the link, you are under no obligation; rather you will have the opportunity to see quotes from several student loan refinance companies.
Additionally, when you follow my link to use their comparison tool, I receive a commission.
This amazing education also came with a hefty price tag. I was granted a substantial scholarship, and took out the maximum allowable amount of federal student loans. Despite all of that, I still needed to come up with an additional $24,000. Well, I certainly didn't have it. So, I took out a private student loan. That is pretty much what all of the students at my conservatory were doing, and it didn't occur to me that this would be a problem. In the Summer of 2005, I graduated from the program. I was living in a cute little neighborhood in Brooklyn. I had roommates, worked as three part time-jobs: one as a personal assistant to a retired actress, a substitute teacher, and a waitress (NYC, actress, waitress--of course that happened)! I loved my jobs, my roommates, my apartment, and for the most part, my life. After the first 6 months, it came time to start repayment on the loans. The private loan wouldn't let me defer like the feds would... Okay, they WOULD, but I could only get 12 months of deferment over the life of that loan, and wanted to save that up for a real emergency, so I started paying them back. The student loan company set me up on a 20 year loan repayment schedule, so that I would have a payment that I felt I could afford.
The loans (there were actually 2 of them) were at a variable rate, that decreased over time, working entirely to my benefit. For that, I am incredibly thankful because it could have gone the other way and been a huge disaster. They hovered around 3% for the majority of the time I was in repayment. This is actually lower than the rate I pay on my federal student loans. Regardless, a variable interest rate is a dangerous thing because the lender can give you notice of a rate hike at any time, which could change your payment amount rather significantly.
I spent the first eleven years only paying the minimum amount on my loans. I would typically round up to the nearest ten dollars, but I really wasn't making enough to be able to pay much more than that. Finally, after eleven years of repayment, my financially world changed significantly. I started making a lot more than I ever had before. Rather than allowing lifestyle inflation to take over, I took the extra money and applied it toward my debts. I wiped out credit card debt first. Once that was done, I decided to focus on my private student loans.
June 30, 2017 marks the final payment of my private student loan debt. On one hand, I feel hugely victorious. I am finally free of that particular obligation. On the other hand, it shouldn't have taken me 12 years to do it. I allowed myself to fall prey to a student loan company "offering me relief" in the form of an extended repayment plan. While, I don't let it get me down, or even feel bad about what happened in the past, the truth is that I should have worked harder to afford a higher payment in order to be rid of the debt sooner. This private student loan has cost me thousands of dollars in interest! The idea of paying thousands in interest makes me feel pretty sick, but at least I didn't really extend it to 20 years! That would have cost me so much more! The reality is, while it cost me a lot of money in interest, I was successful at shaving 8 years off of my original 20 year repayment plan.
To read more about my final push to slay the private student loan dragon once and for all, read How I paid off $10,000 of student loan debt in 6 months.
For those of you that are working on repaying student loans, my sponsor, LendEDU (affiliate link) has a comparison tool that might help you to decide whether or not a refinance makes sense for you, and if so, which company might provide you with them best deal for your situation. By following the link, you are under no obligation; rather you will have the opportunity to see quotes from several student loan refinance companies.
Additionally, when you follow my link to use their comparison tool, I receive a commission.
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