We’re in the process of paying off a massive student loan debt. Keep reading to see how much we paid toward the loan this month, what kinds of unexpected surprises we had, and how we handle such unexpected expenses as these.
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Over the last two weeks, I’ve been preparing for the new year by evaluating our finances. The end of the year is a good time for me to look over our spending habits to see what we did well and what we should work on in the new year.
Near the end of 2017, we switched to the cash envelope method of budgeting. You can read all about how we use the system in this post.
When I reviewed our spending habits for the year, I saw an obvious improvement in our finances when we made the switch. Clearly, this is something that works really well for us. I’ll definitely keep using that system in 2018!
By using the cash envelope system, we were able to make larger student loan payments even when we had unexpected expenses crop up. And trust me, they always crop up. Sigh. More on that later.
For now, let’s talk about that student loan!
If you’re new around here, let me fill you in on our particular student loan situation. If you’ve been here before, feel free to skip this section.
Our Student Loan Story
I graduated from college without any student loan debt. My cosmetology diploma, associate’s degree in business administration, and bachelor’s degree in business administration all came from affordable schools. I even took most of my business classes online, so I didn’t have to pay for expensive student housing!
My debt-free education was a blessing since Josh had enough student loan debt for the both of us. Growing up, he didn’t have the same support system I had. He didn’t have anyone there to help him pick an affordable school, so he ended up at a very expensive for-profit university.
Don’t get me wrong. We’re very grateful for his education. His bachelor’s degree is in computer information systems, so he was able to get a good job one month after graduating. But that education came with a hefty price tag, one that he wasn’t fully aware of when he signed up.
In all, he ended up with $75,000-$80,000 in student loan debt. We aren’t sure what the exact amount was because he had been making payments toward the private student loan before we got married. I didn’t keep track of his payments back then, and he doesn’t know how much he paid from March 2014 to August 2014.
When we got married that September, I began paying the bills and keeping meticulous payment records. That month, we paid off the remaining $11,000 private student loan out of our savings account and focused all of our energy on the federal loan, which totaled $64,000.
It’s kind of cool to see how much we’ve been able to pay from year to year. Here’s what our payments in 2014, 2015, and 2016 looked like:
So let’s talk about our most recent payment!
When I made December’s payment, the loan balance was $39,965.63. I made a payment of $775.00, which brought the balance to approximately $39,190.63. This is only an estimate since the loan accrues interest in the few days that it takes for our payment to process.
Related: Student Loan Update: November 2017
Related: Student Loan Update: October 2017
Since that was the last payment of the year, I was able to compare 2017’s total payments to the total amounts we paid in 2014, 2015, and 2016. We were able to pay more in 2017 than we did in 2015 and 2016, so that was a nice improvement!
However, I really wanted to surpass even 2014’s total payments.
And we would’ve gotten away with it too, if it weren’t for meddling neighbors. (Scooby-Doo, anyone?)
Remember how I said unexpected expenses always come up? Well, this was one of those times.
Potholes, Neighbors, and a Christmas Surprise
We live on a dead end street with eleven other houses. Our street plus two others make up our small subdivision.
Unfortunately, our street is the only one of the three that isn’t state-maintained. Weird, right?
The builder dropped the ball back in the 80s when these homes were built, and our street suffered the consequences. It’s a mess of potholes, to say the least. However, we’re the first house on our street, so we don’t have to deal with the vast majority of the holes.
Well, some of our neighbors at the very end of the street decided that it was finally time to do something about the mess. And I can’t really blame them since they’re the ones having to dodge potholes every day.
However, this repaving project (if divided evenly among all of the houses on our street) would cost us $3,000 out of pocket.
With only a few weeks’ notice.
I was livid.
Fortunately, Josh is a saint. He patiently listens to my rants and then gently pulls me back from the edge of insanity.
He agreed that it was a ridiculous request. First, we’re the newest ones on the street. We purchased this house two years ago, but almost everyone else has been here for 20+ years.
Second, about 90% of the potholes are beyond our house. They don’t affect us.
There was no way we were going to shell out that kind of money when we’re trying to pay off a giant student loan on one income. However, since we would benefit (albeit minimally) from a newly paved road, we decided that we should probably contribute something.
After all, what would you do if you had multiple neighbors knocking on your door asking you to chip in?
We settled on $500. No more, no less.
The Final Tally Says…
In 2014, we paid a total of $13,300 toward Josh’s student loan. In 2017, we paid $12,820.
The difference between the two numbers is $480.
If it weren’t for the repaving project, I could have reached my goal! We would have paid $20 more than 2014’s total if we had used that $500 on the loan instead of the road project.
When I realized this, I wasn’t mad, per se. I was just disappointed. And slightly amused. You have to admit, it’s a pretty weird coincidence!
But I’m not going to sweat over $500. In fact, I have a good feeling that 2018 is going to be the year that we surpass 2014’s total. Our cash envelope system is going to get us there.
The moral of the story? Unexpected expenses are always going to happen.
Even when I think we’re going to have a perfect month and follow our budget down to the last dollar, something happens to set us back a little bit. Fortunately, this particular unexpected expense didn’t affect us too much. We didn’t have to dip into our emergency fund or anything.
But when things do come up, I like knowing that we’re covered. It gives me such peace of mind to know that we have an emergency fund waiting to cushion the blow in case something big happens.
If you’re on the fence about having an emergency fund, or maybe you just need some tips for how to create one, check out this post.
And if you want to know more about the principles that encouraged us to pursue a debt-free lifestyle, check out Dave Ramsey’s book The Total Money Makeover.
How do you handle unexpected expenses? Do you have an emergency fund to cushion the blow?
- Want to Take Control of Your Finances? Dave Ramsey Can Help
- How to Budget Using the Cash Envelope System (and why you should!)
- How to Know Which Financial Advice to Follow
- 4 Reasons You Need an Emergency Fund
- How We Cut Our Spending to Maximize Our Student Loan Payments
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