How We Paid Off $76,000 of Student Loans in Less than 3 Years (and my husband quit his job)
Our strategy to paying off our students loans was really quite simple. Nothing in this post is rocket science, and most of our plan was inspired by Dave Ramsey’s Baby Steps. I share our story to encourage you it is possible to get out of debt by simple principles, and I hope it inspires you wherever you are with your finances.
So here we go..
When Drew and I got married, one of our biggest goals was to pay off our $76,000 of student loans ASAP!
We both wanted to pay off debt before having kids. Not to mention, the thought of paying roughly $250,000 in the long-term with interest rates was infuriating and a good motivator to GET ON IT.
If you haven’t done this, Google a loan calculator to see what the end amount will cost. It’s super motivating to aggressively pay it off!
With the thought of having kids 2-3 years into marriage, we decided to pursue a plan to pay off our loans within this time-frame. We knew it would take a lot of discipline and God’s providence but it would be worth it. With the monthly loan payment of $986/month (basically the cost of a mortgage!!) we knew this would be a huge hindrance and harder to pay off the longer we waited.
Earlier on in the year that we got married, we started making financial decisions that aligned with our end goal. We purchased older cars that we could pay cash for, and I downsized from my own apartment in a nice area and moved in with roommates to save ~$350/month. We were already frugal but we tightened up on spending, in general.
When we got married, part of our strategy was to primarily build our lifestyle and budget on Drew’s income. For us, this meant making some “sacrifices” like buying used furniture and minimal decorations, living farther from our church and community, living an in older apartment complex, and spending far less than we made.
We got on a strict budget and used an amazing tool called You Need a Budget (YNAB). This is an incredible tool for predetermining what you want to spend in each category, tracking what you spend, viewing spending trends, and creating saving goals. It’s similar to Mint, but you manually track everything, so you’re constantly aware of what remains in each category.
With the end goal in mind (paying off our loans in 2-3 years), we set our monthly budget categories (groceries, entertainment, rent, etc.) based primarily on Drew’s income so we could put most of my income towards loans. These predetermined goals, both overall and monthly, helped “gamify” sticking to our budget categories.
To reach the monthly goal of putting most of my income (in addition to the regular payment) towards our loans, staying within each category helped maintain the overall goal. Each month paying our end of the month goal brought us a step closer to paying off another loan. If our grocery budget was $300/month, I knew that not spending over in groceries would help reach the monthly goal.
Reaching our monthly goal gave me energy to keep up the hard work. Knowing we had a goal and reaching it in a month was motivating and provided monthly, attainable goals.
In order to stay within our budget, we tracked everything we spent. Not even joking! $1 pack of gum…yep, we tracked it! Seriously. We built the habit of checking our budget before spending, which I think is crucial for serious debt elimination.
Another motivator for us was aggressively paying off one loan at a time rather than spreading the extra loan payments over all loans. We started with Dave Ramsey’s advice of paying the smallest loans off first. Next, we paid the one with the highest interest rates.
It’s super exciting when you pay off a loan to see the total monthly payments decrease. Next to paying off our final loan, our biggest celebration came when we paid off the 1st of 3 major loans that was roughly $20,000. Our minimum payment went from $986/month to less than $500/month, allowing us to add an additional $500/month towards loans.
Cutting our monthly loan payment in half also allowed Drew to quit his job for a year to pursue a career change. Had our debt not substantially decreased a couple of months prior, we probably wouldn’t have entertained the idea. This is just one example of the benefits from making radical, disciplined financial decisions for a preferred future.
Literally living on one income, made us tighten down the budget even more. Again, this is when having a clear vision helped us stick to the daily sacrifices we were making. But… It. Was. Worth. It!
By God’s grace, Drew started his new job in January of last year and we got back on our original plan of paying one person’s income towards loans and sticky to a tight budget. We were able to pay off our last loan 8 months later, August 2016.
I can’t tell you how exciting it’s been, and the weight that’s been lifted! Living on a tight budget for ~3 years was challenging but, in hindsight, I don’t look back and feel like we missed out on anything of significance. If anything, I’m extremely grateful for the experience, as it’s taught me so much about where my identity and joy come from, stewardship, and being grateful for what you have.
I recognize that everyone is at a different place financially, and that your strategy may look much different than ours. I do hope, however, that our story has encouraged you wherever you are in your journey. Our journey required a vision, a plan, and discipline, but the strategy was really quite simple.
Whether you have a lot of debt like we did, or a small amount; whether spending less comes easy for you, or is a big challenge, I’d encourage you to pursue freedom from debt. It’s so worth the sacrifices you’ll make.
I hope this has encouraged you wherever you are today. I look forward to expounding on many of the things I learned along the way!
P.S. Just for fun, here’s some scenarios from our story. You may relate or feel encouraged to get crazy with budgeting…
You know you’re on a budget when…
- You think splurging is buying $3 “special” face scrub
- Buying gum is a treat…and sometimes you chew it as dessert to save money
- You have random dinner like scrambled eggs with broccoli and Asian dumplings in efforts to stay within budget and clean out the fridge
- You choose between buying hairspray or mousse, waiting until next month to buy the other
- It’s the end of the month and you combine 3 categories of your budget to pull together enough money for fast food burgers