In the last student loan update of 2018, see how we made some radical changes to our spending so we could end the year on a high note. We started this journey four years ago with $80,000 in student loan debt, so keep reading to see where we are now and how we’ve been able to make such quick progress on one income!
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It’s time for another student loan payoff update! These monthly updates are where I share our progress as we work toward a debt-free lifestyle.
We decided to pay off our debt early after taking Dave Ramsey’s signature Financial Peace University course. Dave gave us the valuable information we needed to pursue a life of financial freedom. Since taking that course, we’ve been working hard to reach our big dream of being completely debt-free. If you’d like to pursue financial freedom too, I highly recommend reading Dave’s book The Total Money Makeover. It’s a wonderful resource that will change your life!
So let’s get back to today’s student loan payoff update. 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 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.
The Grand Total
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, 2016, and 2017 looked like:
So let’s talk about our most recent payment!
When I made December’s payment, the student loan balance was $29,986.06.
I made a payment of $1,000, which brought the balance to around $28,986.06. This is just an approximation since the loan still accrues interest during the few days it takes for our payment to process.
So far, we’ve paid $11,905 toward the loan this year, and we’ve paid a grand total of $56,725 in just four years and three months!
Thoughts on December
$1,000! Aside from the two three-paycheck months we had in 2018 (May and November), this was the most we’ve paid in a single month! As you can see from the picture above, we typically pay in the $700 range during the normal months when Josh gets his standard two paychecks. So for us to pay $1,000 is pretty impressive!
So what’s the deal? How did we pay so much on the loan without Josh getting an extra paycheck?
Hint: It wasn’t the money we received for Christmas!
Actually, we tried our very first ever no-spend month! I mentioned wanting to do it in last month’s student loan update, and we actually pulled it off!
I’m in the process of writing another blog post detailing our no-spend month — what worked, what didn’t work, how we handled Christmas, etc. So be on the lookout for that post coming soon!
In the meantime, here’s a brief overview of our very first no-spend month.
Our No-Spend Month Challenge
We decided at the end of November to try one of those no-spend challenges I’ve been hearing about for the last year or so. I’ve secretly been wanting to try one, but I’ve always put it off for one reason or another.
But after some serious overspending in October and November, I finally decided that enough was enough. It was time for drastic measures to reset our spending.
So with Josh on board, we decided to try our very first no-spend challenge.
Luckily, I had already finished the last of our Christmas shopping, so no family members suffered at the expense of our no-spend month. 😉
After researching the rules of no-spend challenges, I came up with a system that worked for us.
In addition to our usual bills, we decided to stick to a strict $500 spending limit in December. That included $300 for groceries (since we follow a mostly whole food, plant-based diet, we require fresh produce on a weekly basis), $60 for the kitties (litter and Oliver’s special grain-free food), and $140 for gas so Josh could get to work.
No eating out, no beauty products, no household items, no “fun” money, no new clothes, no entertainment other than our Netflix subscription, no new video games for Josh, no extras.
We added a stipulation that Christmas money and Josh’s birthday money were free to use for whatever we wanted since that money didn’t come out of Josh’s regular pay.
But other than that, we were on a serious spending freeze.
It was a little rough at first, but we made it! And do you know what? Severely restricting our spending allowed us to pay a whopping $1,000 on Josh’s student loan!
It just goes to show that a little restraint can make a big difference in our finances.
How You Can Pay off Your Debt Quickly Too
If you’re in the process of paying off your own debt, then you may be interested in learning how we’ve been able to make such quick progress even though we’re a one-income family. Here are some things we do to maximize our student loan payments. They’ll help you pay off your debt quickly too!
You can’t make the best financial decisions if you don’t have a solid understanding of personal finance. But don’t worry; it really isn’t hard to learn. Start by reading Dave Ramsey’s book The Total Money Makeover. That book will give you the information you need to manage your finances and tackle your debt the right way.
Make a budget and stick to it!
If you want to maximize your debt payments, you have to have complete control over your money. The only way you can do that is by making a plan for every dollar you expect to earn before you ever get a chance to spend it. That’s where a budget comes into play.
A budget helps you prioritize your spending so you can reach your financial goals. If you need some help, I wrote a post that teaches you how to create a budget.
Use the cash envelope system
Making a budget is one thing, but actually sticking to it is another challenge altogether! In my personal experience, the best way to make sure you stick to your budgeted amounts for each budget category is to use the cash envelope system.
Basically, each budget category (with the exception of bills and gas) has its own envelope. You might have envelopes for groceries, restaurants, clothing, gifts, entertainment, pets, household items, etc.
Once you make your budget and decide how much money you want to spend on each budget category, you withdraw the total amount of cash you expect to spend that month and sort it among your envelopes.
When you go shopping, you pay for your purchases out of the relevant envelope. Once the money is gone, you’re done spending for that category for the month!
This system holds you accountable because you’re limited by the amount of cash you have in each envelope. It’s much easier to stay under budget when you have a limited amount of cash to spend.
Find ways to save money
In order to maximize your debt payments, you have to spend less money on your other living expenses. It can seem hard at first, especially if you’re not especially frugal. However, there are lots of little things you can do that add up to big savings. Check out these posts to get some ideas:
- 30 Ways to Save Money So You Can Reach Your Financial Goals
- How We Cut Our Spending to Maximize Our Student Loan Payments
And if you need some support with the emotional aspect of saving money, be sure to check out these posts:
- How to Save Money Without Feeling Deprived
- How to Spend Less Money When Your Spending is Out of Control
Build an emergency fund
Once you get a grip on your finances by creating a budget, using the cash envelope system, and finding new ways to save money, it can be tempting to throw all that money toward your debt right away. Please resist that urge.
While you do need to hit your debt with everything you’ve got in order to knock it out as quickly as possible, you shouldn’t jeopardize your financial stability in the process. Before you tackle your debt with gazelle intensity, you need to have an emergency fund in place just in case something goes wrong.
If you’re just starting out, save up $1,000 in a starter emergency fund while you make the minimum payments on your debt. This starter emergency fund will serve as a nice cushion in case you have a medical emergency, your car breaks down, or you have an unexpected house repair to pay for.
Related: 4 Reasons You Need an Emergency Fund
Related: How to Build an Emergency Fund
Once you have that emergency fund built up, you can shift your focus toward your debt. But don’t ignore your emergency fund altogether! Keep adding a little bit to it each month so it can grow to a fully-funded emergency fund.
As a general rule of thumb, a fully-funded emergency fund has between three and six months’ worth of expenses in it. This should cover you in the event of a job loss or some other big financial burden.
Wrapping It Up
And that wraps up another student loan update! I can’t wait to tell you all about our no-spend month since it made such a big difference in our student loan payment and our spending habits in general. Stay tuned for that blog post coming soon!
Also, if you find yourself in a similar debt situation, be sure to do the things I just mentioned: educate yourself by reading Dave Ramsey’s book The Total Money Makeover, make a budget and stick to it, use the cash envelope system to control your spending, find new ways to save money, and build an emergency fund. When you do these things, you’ll be well on your way to paying off your debt too!
Other Posts You May Enjoy
- 9 Personal Finance Resources You Need in Your Life
- The Best Financial Advice I Ever Received
- Want to Take Charge of Your Finances? Here’s How Dave Ramsey Can Help
- How to Know Which Financial Advice to Follow
What about you? Do you have any tips for getting out of debt quickly?
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