Like millions of other young Americans, I caught the student loan plague. Around $70k dollars worth of it to be exact. The joys of higher education...and "high" certainly isn't a misnomer. I did everything that I was “supposed” to do. I stayed in state and got scholarships, but it wasn't enough to avoid it. I needed loans to make up the difference in tuition and what I was able to pay through loans and out of pocket. School was expensive.
I lived in ignorant bliss until six months after walking across the stage for graduate school. *Welcome to student loan repayment.* To make things worse, I was paying off both undergraduate and graduate school loans. Let's just say my salary didn't quite add up to the amount I owed. So, for about two years, I paid the minimum amount so that I wouldn't default, but could still afford to live. I accepted that this would be the case for the next 30 years of my life.
During that time, I was introduced to Dave Ramsey's financial teachings through the church that I was attending. It was then that I discovered a new view of money and gained a new determination to become debt free. (Side note: it's so amazing what exposure to new concepts can do for your life goals and visions. It opens your horizon to what is possible.) In December of 2012, I decided to jump on the debt free bandwagon and get rid of my student loan debt. I read Total Money Makeover and began what Dave calls baby steps. I stepped into 2013 with a goal of eliminating my undergraduate loans within the year. It was a lofty goal, but I was determined to achieve it. In a little over a year, I was able to rid myself of my undergraduate student loans.
Here's what I did:
Saved $1000 for an emergency. This money is exactly what it says it's for- emergencies. Think unexpected car repairs, busted pipes, that kind of emergency. NOT the latest shoes or tech item. I used a bank account that's not attached to my checking account and removed overdraft protection. That way, it wasn't a buffer for when I wanted to overspend my budget. If there was an emergency that required me using these funds, I'd immediately add back to the account until it was back at $1,000 again. If you've got $1,000 already, good for you! The "excess" can be used to begin paying off your debt.
Paid off debt. This is where the rubber meets the road. I used all free cash to start paying off loans from the smallest to the largest. That means after tithing first, then paying bills, I used what was left to put toward my debt. Don't worry, I still purchased things and even took trips, but only if they were budgeted for. It's all about prioritizing and balancing becoming debt free with discretionary spending. I got creative on how I could get extra cash. I sold items in my closet and even used my tax return solely for debt elimination. There's an infinite number of ways to make extra cash, so you can get creative.
Paying the smallest debt then progressively paying off the largest is what Dave calls the debt snowball. Beginning small allows you to build your confidence by giving you a quick victory. Each time I paid off a loan, I used the extra money in my budget to go toward paying off the next smallest loan.
There are 5 additional steps to complete the process of becoming financially free. I've included a link to these steps here. There is also great advice and templates for budgeting here. Regardless of whether you're trying to pay off student loan debt or consumer debt, the process works for any situation.
Though I'm still in the process of paying is my graduate school loans, I'm not far from it. The key has been and will continue to be discipline. Can you be disciplined about your spending-- living within your means and delaying gratification until later? Are you willing to live like no one else so that later you can live like no one else? If you can say yes to these things then you're well on your way to becoming debt free.
To help me stay motivated I created a mantra: "Debt free by 30!" Apart from buying a house (which Dave also teaches on), I will be, because I am combining action with my faith. I believe in Romans 13:8- "Let no debt remain outstanding, except the continuing debt to love one another, for whoever loves others has fulfilled the law" (NIV). I believe that it is God's will for us to not be bound by financial debt, but to be completely free in him.
Set your financial plan beginning now. Write down your financial goals for the next year. List your debts from smallest to largest and begin getting them paid off. Don't be a slave to your finances, allowing it to dictate what you can do in life. Instead, decide today that you'll take control of your financial situation.