Skip to main content

Blog

Student Loan Attack Plan

Like countless other college graduates, I have the burden of student loans bearing down on me. I have my Bachelors and Masters Degree in which I completed in the Spring of 2016. I’m responsible for paying back just over $35,000 and will have a monthly payment of $300/month for approximately 19 years. That’s a whopping $68,000 I will have paid before I’m finally debt free at the ripe old age of 45, which is about average I am fortunate as I know others are in a much worse position. We’ll be offering classes in the future that will help our readers create custom attack plans for any situation to take down their debt.

To provide some context, I’m not able to pay off a couple thousand dollars a month like my friend. I own a house, have two vehicle payments, and my first child to arrive in June this year. My wife and I are both school teachers so combined we make approximately $90,000/year before taxes.
To be clear, I’m an advocate for most people to college. Look for a post on this later. If it were not for these student loans, neither my wife nor I would’ve been able to receive a degree. And if it were not for our degrees, we would not be able to buy cars, houses, or afford children!

Here’s my game plan:

Once we began earning a consistent income, we did the smart thing and set a budget. But when we created our budget, we didn’t live within our means, we lived below our means. So we’ve been accumulating a surplus of roughly $500 every month that is going directly into savings. I recommend having 3-6 months’ worth of expenses in your emergency savings before you can start using your extra cash. (Note: the minimum payment for all debts is included in monthly expenses.) After our savings reaches our preferred amount, it’s time to go toe to toe with my loans…

I have two options that have roughly the same total payoff amount, but one is much simpler than the other.

Half of my loans are federal and the other half is privatized. There are a total of six loans with all different interest rates. Strategy #1 would be to make the minimum payment plus my aforementioned excess of $500 every month. It’s often important to pay the loans with the highest interest rates first, but not always, in order to minimize the dreaded accruement. Strategy #2 is to refinance and take out a personal loan from a bank to pay off all of my student loans and have a single loan with a simple interest rate. There are two big catches with this, however. You have to have a good credit score to get a low rate and you will no longer be able to write off the interest on your federal taxes.

Making payments in the current system is difficult because I have to log in, mail, or call two different agencies and specify the fluctuating amount for all six loans every month. With a personal loan, I will be billed the exact same amount every month and can leave it on auto pay.

We have decided to take out a personal loan for $35,000 at 11% for a monthly payment of $761/month for five years. The total payoff will only be approximately $46,000! I will save over $22,000 and be debt free 14 years sooner than if I just made the minimum payments! You will have to do the math to find out which strategy is best for you, but we’ll talk more on that later. Here’s the good kind of principle to live by: If you sacrifice now and live below your means to pay off debt, it can save you thousands and thousands in the long run.

Be sure to subscribe to our greenbelts newsletter so you get all of our insight here at The Money Dojo!

CB

**This post may contain affiliate links

dooder / Freepik

This May Be The Most Important Article On Debt Elimination You’ll Ever Read

Start Eliminating Your Debt, Now!

Debt. The other 4 letter word. Here at The Money Dojo, debt is a dirty word, and we’re dedicated to its swift and complete eradication. I’ve mentioned in previous posts that I consider myself a disciple of Dave Ramsey. Particularly, his methods for debt elimination. Now, Dave writes entire books on this topic, but I can break it down for you in a few simple steps. Like most of the things we discuss here at the Dojo, the methods we use are simple, but they require commitment in order to be successful.

 

  1. List It: Make a list of all your current sources of debt. Write them down in order from smallest remaining principal to largest.

  2. Make a Budget: Create a budget. I briefly touched on this topic here, but will expound on it even further in the future. To pay more than the minimum on your monthly payments, you’ll have to get the most out of every dollar.

  3. Pay Extra: In your budget, put any “extra” money you have once all the bills and essentials are accounted for, and add it to the payment you normally make on your SMALLEST current debt. This will both reduce the time it will take to pay off the debt, and save you money on interest in the long run.

  4. Keep the Ball Rolling: Once you pay off your first debt, go back to your original list (step 1) and put a big red line through it. Congratulations! You’ve reached a big milestone in your financial journey. Now, add the entire payment from the debt you just paid off to the next debt on the list.

  5. Repeat: Repeat step 4 until every debt on your list has been eliminated.

There are several different schools of thought on debt elimination. You’ll notice that I didn’t mention interest rate a single time in my post. The reason we’re starting on the smallest principal as opposed to the highest interest rate, is because getting a quick victory is important. 90% of the challenge of getting out of debt is just the belief that it’s possible. Once you cross that first debt source off the list, you’ll be enticed to keep going, and in turn create a healthy financial habit.

Be sure to subscribe to our greenbelts newsletter so you get all of our insight here at The Money Dojo!

Learning is Earning

Learning is Earning

Expanding your knowledge is crucial to expanding your wallet. The more you know, the more you can earn. Learning is indeed earning. I like to do a lot of my learning the old fashioned way, books! I guess I should throw out the full disclaimer right now (this method will require reading). I know most people either love reading, or the flip side, would rather do just about anything in the world instead. I used to fall into the second category, so I know you can get out of that dilly dilly dungeon. Since you’re here at the dojo, I’m assuming you’ve found your passion in finance. Finding something you’re passionate about is the key to change. I find myself reading books…. I hate to say it…. for fun now. I believe you can too. So, I thought I’d share with you two places that I go to find books for super cheap.

  1. Estate Sales– You can usually find an entire bookshelf, or two, filled with books. Most of the time (in my area at least), the most expensive books will be $2 opening day of the sale. As the sale goes by, deductions begin to arise. A lot of final days, you can get your books, or whatever else might catch your eye for 50% off. Not to mention, sometimes you can bundle your haul together and offer up a price, you’d be surprised how many times they accept. I always use www.estatesales.net to find the best sales in my area.
  1. Goodwill– If we’re talking about giant bookshelves full of untapped potential, we’re talking Goodwill. Most of the Goodwill locations I’ve visited have a giant bookshelf that spans an entire corner of the store. A lot of them offered up for under $2. Much like estate sales if you catch a Goodwill on the right day, you can get even more discounts. Goodwill color coordinates their items. So, let’s say you have a book with a green price tag on it for $2, you noticed when you walked in, that today was 30% off all items marked in green. That $2 book just ended up only costing you $1.40. Plus, Goodwill is always rotating their inventory, so you never know what you might find. Use their website www.goodwill.org to see if there is a location in your area.

Be sure to subscribe to our greenbelts newsletter so you get all of our insight here at The Money Dojo!

 

MB

iconicbestiary / Freepik

The Best Way To Pay For Your Next Vehicle

The Best Way to Pay for Your Next Vehicle

You took our advice and narrowed down your search for your next vehicle.  You’ve honed in on the perfect used car. Great job! Now you don’t have to worry about the depreciation problem we talked about in this post. But you’re not out of the woods yet. The dealer still has a few tricks up their sleeve too. You didn’t think you were gonna get away that easy, did you?

 

Let’s set up the scenario. The car you chose costs $20,000. The dealer comes back with what they claim is a more than generous offer of 4.5% APR over a 72 month term. The monthly payment is “only” $317. Now that’s a great deal! Or so they’ll ATTEMPT to lead you to believe. Little do they know, you’ve been honing your skills in The Money Dojo lately. Don’t sign that dotted line just yet.

 

While I’m sure most of us in the market for a new vehicle could afford that $317 monthly payment, we like to get the most out of every dollar we spend here in the Dojo. The fact of the matter is (tax, title, and license aside) if you finance your car under the parameters listed above, you will actually pay $22,858.60 by the time it’s paid in full. That’s over 14% more than the original $20,000 price tag.

 

There is only one way to combat this problem. Don’t finance. Pay Cash. It may seem scary to drop such a large amount of money at one time, but in my opinion, it beats the brakes off of paying an extra 14% for the exact same vehicle. Now, this route will require a little discipline. To pay cash for a $20,000 vehicle, it requires you to have $20,000. This is where a budget comes into play. Every month, you need to be paying yourself a car note. But, instead of overpaying a finance company or dealership for your current vehicle, you will now be saving up for your future vehicle. In fact, if you were paying yourself a car note for that 72 month period, instead of the dealership, you would only have to put away $278 a month! 

 

It’s really a simple concept; it just takes the dedication and discipline to set it into action. Obviously, this method of payment will take some planning, but it will save you thousands upon thousands of dollars in the long run. Ditch the “normal” approach of wasting your hard earned money on interest, and start doing things the Dojo Way today!

Be sure to subscribe to our greenbelts newsletter so you get all of our insight here at The Money Dojo!