Wow, this feels good to say: fter years of hard work and sacrifice, I am now officially debt free. So long, student loans. Good-bye Debt Monster
How can someone with an average salary after college tackle tens of thousands of dollars in student loans in just a few short years? Here’s how I pulled it off:
5 Strategies to Defeat the Debt Monster and Crush Your Student Loan Debt in No Time
Below all the superhero strategies I used to pay off my massive debt in a short period of time. Some of these tips may work for you; others may not. But even if you decide to only try a few of these tactics, I guarantee you’ll be one step closer to financial freedom and living an amazing debt-free life.
Here’s how I paid off student loans – all $34,579 of them – in under four years:
Step 1. Hustle
When I got my first “real” paycheck, I thought I had it made. As soon as I started earning decent money after college, I realized just how quickly my take-home pay disappeared. I honestly thought that I would be able to pay off all of my student loans in a year on a $48,000 salary… HA.
I made pretty good progress on my debt my first year out of school, paying back almost $7,000 in 12 months. But I knew that I had to boost my earnings if I wanted to quickly dig myself out of this debt hole. And that meant finding ways to earn more money on the side.
I knew that I wanted to earn extra money, but I also knew I wanted to keep growing my career and getting new skills. I started reaching out to companies, start-ups and websites that I thought were doing interesting work, and then I offered to work for them for free. Why free? I wanted the experience and I made sure that we agreed to revisit our work together after a month or two to see if we could turn it into paid work. After launching my blog, I also began freelance writing for other personal finance websites.
I’m not going to lie: working on the side is tough. More than a few of my weekends were spent hunkered over my laptop and I had a few deadlines that kept me up very late at night. But every extra dollar I earned helped me tackle my student loans. Not only did I have a few hundred dollars extra each month that I could use toward my debt, but I was also building awesome experience that I later used to leave my job.
Step 2. Negotiate
This is hands-down the most overlooked but most effective strategy when it comes to finding extra money to pay off debt. I always ask for more: a raise at work, a higher starting salary at a new job, and even fees on my credit card. Of course, I also spend hours researching and preparing my request with facts and figures. But more importantly, I went into these conversations with confidence. With just a few hours of research and some rehearsal in front of the bathroom mirror, I was able to get a significant raise at my previous job, negotiate my starting salary at my new job, and waive late charges, fines and annual fees from my credit cards and bank accounts.
How much did I earn just by asking over the last 4 years?
I earned $13,000 in bonuses and salary adjustments by negotiating.
That is not an exaggeration. And this doesn’t even include the few hundred dollars I’ve saved in credit card and bank account fees. Can you imagine what you could do to your debt if you had an extra $13K? That’s a good feeling
If you want more about the specific strategies I used, check out my post on negotiating: I negotiated a $13,000 salary increase (and all it took was $20 and 4 hours of prep)
Step 3. Allocate
The biggest mistake I made out of college? I used my checking account balance as my budget. If I had $1,000 in my account, I felt like I had $1,000 left to spend. So before I started getting used to my fat paycheck, I mapped out my fixed expenses and student loan repayments with a quick, back-of-the-envelope budget. That gave me a better sense of what I could spend – and what I needed to do to accelerate my debt payments.
The other big win was setting up automatic transfers from checking account to my student loan lender. I didn’t have to think twice about the money that was being automatically taken out. And that gave me more incentive to pay more than the minimum when I could afford it so I could reduce my debt quickly.
I also made sure I had a plan for how I would spend any extra money that came my way. If I got a raise at work, earned extra money on the side or got a tax refund, I made sure to allocate that extra money before it hit my account. My rule of thumb for extra cash that came my way: Student loans: 50%, Long-term savings: 25%, Whatever I wanted: 25%.
Step 4. Prioritize
I knew if I wanted to tackle tens of thousands in debt in a few short years, paying off my student loans had to become one of my top 3 financial priorities – and that meant ruthlessly cutting down on the things that didn’t matter.
For the last four years, I had a clear list of priorities: paying off debt, buying healthy food and travelling to the West Coast every few months. Everything else was slashed. I stopped buying lunch at work (I think I’ve bought lunch maybe 10 times in four years!). I tried not to spend more than $50 a month on new clothes. And I only bought one new book a year (even though I love to read, I always went to the library instead). With my priorities set, I did my best to scrimp and save everywhere else.
Just as important as prioritizing debt was prioritizing my savings. Even just $1,000 in my rainy day fund gave me some piece of mind that I could handle a true emergency if it came up. So even though I was insanely focused on paying down my loans, I knew I still had to put some money away in savings.
Step 5. Motivate
Psychologically, this was my most important step. The biggest motivation for me came from publicly declaring my debt goal online. After posting a YouTube video about my debt story, I got comment after comment asking how I was doing and if I was debt free yet. I felt accountable to reach my goal, even to complete strangers! And after launching The Empowered Dollar, I began to build an awesome support system of fellow indebted bloggers, fans and friends who cheered me along my journey.
So if you want to turn your finances around, find a way to declare your intentions and announce it to the world. Tell your family, friends and dog that you’re going to tackle your debt once and for all and you need their help staying accountable.
It also helped me to set a timeline. By announcing in March that I was going to pay off all of my debt by the end of the year, I knew I had to get an aggressive jump start on my payments.
Hopefully that was a helpful rundown of how I defeated the Debt Monster! I encourage you to take a moment to imagine your life and all the possibilities you’ll have without debt. No matter which strategy you use, that picture of a debt-free life should be enough motivation in the short term to get you going
PS You can get more tips for defeating your own Debt Monster in my free comic money guide (you can sign up for that below).
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and all the superhero tricks I used to pay off $35K in debt in under 4 years