How We Are Paying Off Student Loan Debt

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Last night, my little sister drove me to the grocery store. She has her permit and since I’m older than 21, I am considered mature enough according to the state of Texas to be the supervising adult over a teenage driver. Yikes. It’s more fun than I thought, getting to watch her freak out when she parked a car for the first time and hear how 20 miles an hour feels like plenty fast for her.

Instead of driving directly home after the grocery store, we decided to drive past our old house where we grew up as kids–this was a monumental moment for her because she “got to” drive over a speed bump for the first time. She was really excited. She doesn’t yet understand how terribly annoying they are.

As we drove past my house, I thought of a memory.

As a young girl, I had a pink, glittery make up box. There were little sections for brushes and lipstick and eye shadow–but I didn’t use it for make up. I used it for money.

Each section was filled with pennies, nickels, dimes, quarters, and then there was a section for coins that were over 50 years old, because they had to be worth more money than the new ones. (They weren’t) I counted my money all the time and decided in my brain that I would be a banker when I grew up. Or an accountant maybe. All they do is count money, right? And I loved counting my money.

I’ve always been a saver. Money from birthdays, Christmas, Easter, lost teeth–it all went into the pink money box. And I would know if someone tried to take some of my precious money, because I counted it all the time. I remember once, sitting on my bed, counting my money in front of my sister Natalie and one of her friends, bragging about how rich I was because I had $40.

Fortunately, my protectiveness over my wealth meant I spent my money meticulously. When I started working in high school, all of my paychecks went directly to the bank and all of my cash tips were used as spending money. It seemed smarter to save more money than I was spending. In college, I made enough money to eat out and go to movies and take a spur of the moment vacation with Heath, but I always made sure to be saving as much as I could.

It was careful financial spending habits like this, plus the help of parents putting me through college, that let me graduate with enough savings to end up buying an RV and traveling the country. I just didn’t count on one thing.

Student Debt.

Not mine, but ours.

I know a lot of people who are paying off student loan debt. Actually basically everyone I know has student debt or credit card debt.

Unfortunately, most people are ignoring it or accepting it as a reality of life. A woman recently smirked when we told her our plans to be debt free, telling us that everyone will always have debt.

That’s not something you should say to someone trying to pay off their debt. And, it’s not true at all. It is possible to be debt-free, and Heath and I are $19,970.62 away from that.

Well, that’s what the number was yesterday.

Today, we’re $19,973.51 away from debt-free.

Debt, unwatched, spirals and grows rapidly. During the 200 days while Heath and I honeymooned and effectively ignored student debt, our balance bumped up $1,131.75 in interest. That’s an average of losing $5.66 a day.

And we had no idea.

When we first started aggressively paying off our debt in January, our interest rates were still adding over $5 a day to our balance. In March, that number was down to $3.18 a day, and today that number is $2.89 a day. This is the number I love to look at because it shows me exactly what is at stake if I don’t pay off my debt. (This figure isn’t posted anywhere on your account statements. To figure out this number, check your balance today and write it down. Wait 24 hours, check again, and calculate the difference.)

$2.89 a day. That’s a bag of pretzels or a carton of almond milk. That’s a little over a gallon of gas, or roughly 30 miles of travel.

Lost. Gone. Off to wherever your loans are due. In fact, only now, two years after graduation, are our balances on each loan less than the original starting balance. (On one particular loan, it’s only $4.44 less than the starting balance since you always pay off the interest before the loan itself.) And we’ve paid almost $8,000 toward loans this year!

Calculating the daily interest accrued on our account reminds me that the debt is real, growing, and not going anywhere until we pay it off. The faster we pay off our debt, the lower this number gets, and the less we end up paying overall.

The question is, How? How do you pay off student loan debt? Here’s a few different ways we are paying ours:

Best Way To Pay Off Student Loan Debt

The easy answer is to make more money than you spend and put all your profits toward student debt. That’s what Heath and I are doing now. Any “extra” money in our checking account at the end of the month goes directly toward debt. We have a cushion of money in our savings, so we currently aren’t putting any funds into our savings account. Everything goes toward debt. Because like I said, every day we lose nearly $3 just because we’re in debt.

Our balance on January 1, 2015: $27,397.46

Our balance on May 21st, 2015: $19,973.51

In the first five months of this year, we’ve paid off $7,850 in debt. As you’ll notice, the difference between those two numbers above is a few hundred dollars less than how much we’ve paid. The longer you’re in debt, the more money you’re losing.

Keep Your Expenses Low

Rent:

Heath and I live in an RV, which we own and don’t make payments on. But, we of course have to pay rent at RV parks. This number is much lower than a typical apartment and helps us keep low monthly expenses. Since March, Heath has been traveling with his business partner Jia Jiang as they promote his book. With Heath traveling, I’ve been staying at my parent’s house instead of the RV, which has saved us hundreds of dollars in rent. (Plus it saves me from a lot of lonely nights!)

Car + Insurance:

Heath sold his car last year and we are a one car family, with no car payments. We saved a couple hundred dollars by paying off our car insurance for the entire year back in January instead of making monthly payments. We put this balance all on a credit card, since we couldn’t afford to pay so much at once. I pay off $100 each month to keep the balance from accruing any interest. I’ve done the same thing with our RV insurance. This has saved us hundreds of dollars while still allowing us to pay off our insurance monthly with more manageable payments. I would NOT recommend this to anyone who isn’t diligent about paying off credit cards each month, but it’s saved us a bunch of money.

Food:

If you want to pay off your debt slowly, eat at restaurants. This is the fastest way that Heath and I say good bye to our hard earned cash. Our goal is to spend as little money as possible eating out. That means if we want to go out with friends, we order one drink at happy hour and choose a restaurant that gives you complimentary chips and salsa or popcorn, so we aren’t tempted to order food. We eat as many meals at home as possible, and with Pinterest offering copycat recipes from our favorite restaurants, we don’t miss eating out.

Bills:

Heath and I have one monthly bill (not counting the insurance payments that I mentioned above) and that’s our Verizon wireless bill. Since we live in an RV, we don’t have Internet or cable. I have no idea how many hundreds of dollars this saves us, but I know it’s worth it. With Verizon, we do have a jetpack, or hotspot, so we can use Internet whenever or wherever we want. The only trick: using the jetpack uses your data.

Data goes fast every month and during most of the last year, we scraped by using only 8GBs a month and paying roughly $200 for two smart phones + our jetpack. Now 8GBs is not enough to share between three devices, so we needed to update our plan. Luckily, during a promotion, Verizon offered us 15GBs of data for the same price that we’ve been paying each month. Free data? Yes please.

Entertainment:

Automatically, $10.81 flies out of our account every month and goes directly to Spotify. And it is absolutely worth it. We never buy new music and we always have something new to listen to. Plus when you pay monthly, you never have ads and you can download your favorite songs directly to your phone, which means you don’t stream data while you listen. I normally wouldn’t condone anything where you make an automatic monthly payment, but this is worth it, especially since we listen to music in the car so often and can’t afford to stream that much data.

Other Expenses:

We spend money on our websites, maintenance on our car and RV, buying new clothes or hard drives for the documentary, etc. These spontaneous payments add up fast, so I keep careful track of exactly how much we’re spending. Plus, we borrow from friends when we need to. Heath is borrowing a duffel bag since we didn’t want to spend money on buying a new one. I borrow my sister’s clothes so I can take a break from my wardrobe. We borrow books we want to read and I’m borrowing an old phone case so I don’t need to buy one for my phone. These little ways to save money add up fast.

Make Your Money Work For You

Debt can easily take control of your life, so Heath and I actively try to find ways to make our money work for us. We will always be spending money on certain things, so how can we maximize that? Reward programs at grocery stores like Kroger help save money, but how else can we take control of our money?

We have 5 credit cards between us. 2 of which we opened in college and now don’t use, but keep open because our banker told us keeping good credit lines open will help your credit score. The other credit cards are for Southwest Airlines, Alaska Airlines, and InterContinental Hotel Group (IHG). With these cards, we do something called travel hacking.

Since we make all of our purchases on credit cards–when I say all, I mean everything we ever purchase– we accumulate points and miles with each of these companies. This Memorial Day weekend, it’s our one year anniversary, so Heath and I are staying at a hotel near Galveston for free using our points. That’s $100 free, considering I earned the points buying things like gas, groceries, etc.

Plus, we have enough points on Southwest to fly us both round trip to anywhere in the country, and we’re close to earning our companion pass. With a companion pass, I can fly anywhere Heath flies for no cost. It’s like a 2-for-1 flight special every time we fly.

I signed up for the Alaska Airlines card because I knew we would fly Alaska Air to Hawaii back in February. Using the card to buy the tickets + earning miles for the distance of the trip (roughly 5,000 miles), we have almost enough points for one free flight. Easy.

We are not in credit card debt and we pay off our cards consistently. (Remember, I counted my money every week as a kid. Old habits die hard.) If you’re responsible with your money, there’s no reason not take advantage of reward programs like this. For people like us who love to travel, this helps ensure that we can travel for free without worrying about our debt. Before we started travel hacking, we used Chase Freedom cards, which allow you to use points you earn to pay off your balance, which is another awesome perk for saving a little extra money.

Don’t Keep A Budget

Don’t keep a budget, keep financial records. A budget is just an arbitrary allowance or estimate of how much money you should spend each month. (And in my experience, it’s impossible to keep).

Financial records tell you exactly how much you spent in a month–and these numbers are much more real and at times frightening. I keep a spreadsheet that lists all of our possible expenses in a month and record all of our expenditures once or twice a week. At all times, I know exactly what we spend our money on and exactly how much we’re spending.

When Heath and I were dating, he wasn’t the best at managing money. He was horrible actually, and he would admit it. He had terrible habits of eating out, especially at fast food places, and buying whatever he wanted. So, I asked for his bank password (muahahaha) and spent hours recording all of his expenses for the past three months of his life. Needless to say, the numbers shocked him. I’ve heard it said that if you want to see what your priorities are, look at where your money is going.

Hundreds of dollars on restaurants, even more at fast food chains, and barely any at grocery stores. Monthly subscriptions to services he didn’t use anymore and an extra $5 every time he bought gas because he would walk inside and buy a drink and snack. You don’t want to know how much money he spent at Top Golf that summer.

When you see exactly where your money is going, you can take control of your spending. Heath instantly began to change his behavior to stop going out as often and opting to eat in. Now, almost two years later, he’s a pro at watching his spending. The less we spend, the more money we have to put toward debt.

Pay Aggressively

It freaks me out to know that our debt grows every day. If we followed the repayment plans given through our loan servicer, we would pay off anywhere between $5,000-$10,000 MORE than our original balance due to interest.

What? We could practically buy another RV with that much money!

The best way to avoid paying off interest is to pay more than the monthly balance due by as much as possible…or just don’t get into debt in the first place, that’s the best advice. Like I said, we have a few thousand dollars in savings as a cushion, just in case we really need it.

But for this year, we aren’t putting actively saving money so we can aggressively attack our debts. If you want pay off your debt, you have to be aggressive. Spending 10 years paying off student loans doesn’t sound like fun to anybody. We are putting all of the money we can spare directly toward debt.

Many years ago, I heard someone talking about divorce. He said the leading cause of divorce in his experience was financial troubles. Debt, foreclosures, spending habits, etc. Money, particularly the lack of money,  is stressful to practically everyone.

That’s why Heath and I want to be transparent and honest about what our finances are like while we struggle to overcome our debt. By sharing our story, we hope to make it easier for others to be honest when they are burdened by debts and financial trouble.

Our audacious goal is still to pay off all of our debt by December 31st, 2015.

We’re nearing the halfway point for the year, and so far we’ve paid off  27% of student debt balance from January 1st. Progress is slow, but we’re consistently working toward our goal and we aren’t giving up.