Today’s debt free story is from MJ of Dream Beyond Debt, who has made some amazing progress on her loans! MJ is about to turn 40, and lives with her two dogs in Ohio, one of whom graduated “Class Clown” in his training class. Read on for her story.
I didn’t originally set out to pay off my loans in one year. It took over ten years before I felt that my financial life was in a place that I could make any progress on my loans.
For over a decade, I paid the minimum payment. In that time, I paid off a little over $1,000 of a $48,500 total. It took me ten years to pay $1,000. It was a sobering moment. I didn’t want the next ten years to yield such a poor result.
Turning thought into action
A month before the new year was about to start, I took a hard look at my earning and spending. I thought, “I wonder how much I can pay off in the next year or so.” I made about $40,000 that year, and from that had managed to build a comfortable emergency fund. Only after I had that cushion in place was I able to think about eliminating those loans.
I started with the payment that was due just fifteen days before New Year’s Eve. I earned extra money by selling things on Craigslist and working a temporary office job during a break from my contract work. I cobbled together $4,300 for that first “monster payment.” I saw the loan balance decrease to $43,380. Suddenly, it was all I could think about.
Fast forward a few months later, and I’ve paid off $31,500 of my student loan. I can barely believe it. As of this writing, I owe $16,054. I intend to pay that off within the next six months using the same strategy I used to pay off the $31,500. What’s that strategy? Well, I’ll tell you. I broke it down into five parts.
Part One: I made a decision.
I wanted to pay off my loans for YEARS, but I didn’t take any real action. I hung on to the resentment I had about having loans in the first place. I harbored hope that the government would just forgive them, already. But, that resentment and misguided hope was getting me nowhere.
When I finally made the decision to pay off my loans, it was a simple acknowledgement of my responsibility to do so. I simply said, “I’m going to pay off my loans.” It wasn’t big and audacious.
We often hear the story of the captain who led his army to shore and then famously said, “Burn the ships!” He made a decision to defeat his enemies, and there was no turning back. His troops had to win, because they had no way home if they lost. I like to think of my decision as a “burn the ships” moment, but without the flames. I made a decision to do it.
I said, “I’m going to pay off my student loans,” and then added, “I’m going to pay off as much as I can in as little time as I can.” I didn’t make an absolute. I left the goal open-ended because it was an experiment. Plus, I had no idea HOW I was going to do it. I simply knew, “I’m going to pay off my student loans.”
Once the decision was made, I could start taking action, which included taking on extra work, making more money, starting a blog to keep me accountable, putting myself on spending diets, and scheduling the payments. Each action was an extension of that one decision.
Part Two: I made it essential.
Once I’d made the decision, I had to make it clear that it was a priority. To quote a personal finance blog that I find very inspirational, “You can afford ANYTHING, but you can’t afford EVERYTHING.”
I knew that the payoff experiment had to be essential. If it was essential, then it would come before anything else. It was more essential than stopping for takeout or buying books instead of waiting for them at the library. It was more essential than extra trips to the grocery story. It was more essential than a vacation or a new living space.
Knowing that it was essential kept it in sight. It put the payoff before anything else. I postponed certain dreams because the dream of being debt free was more important – it was essential. Learning what is essential to you is valuable information. That information can guide your choices and help you make difficult decisions. Once I realized the payoff was essential, it empowered me to focus on it in a way I didn’t know that I could. I’m amazed by the progress.
Part Three: I do something every day.
My payoff experiment isn’t a “pay it and forget it” type of project. I don’t schedule the monthly payment and cease thinking about it for the next thirty days. Every day, I check my bank balance and at least take a moment to feel gratitude for whatever the balance is. I do that for my loan balance, as well. I review my spending. I read inspirational debt-payoff stories (like the ones on The Debt Myth!) I also read other personal finance blogs, comment on them, interact with bloggers on Twitter, or write my own blog posts.
Some days, I seek out ways to earn extra money, either through applying for short-term gigs or filling out surveys online. Other days, I post unwanted items to Craigslist or eBay.
The point is: I make it a practice. Every day, I do something to move my progress forward. Usually, that means keeping my spirits up or earning more money to throw at the balance. You’ve got to stay motivated – daily.
Part Four: I keep my dreams alive.
Before I made my first payment, I created a list of things that I wanted or wanted to do. Each one requires money and/or effort and/or gear. These dreams are all important, but the essential thing right now is the loan payoff. Once it’s gone, I’ll be able to pursue these dreams without guilt or the nagging feeling that I’m not really free to enjoy them.
My dreams are really my WHY for paying off the debt. And, although I’m delaying them until after the debt is gone, I still keep them alive by nurturing them in very frugal ways. I want to own a home base outright, so every now and then I research home prices and calculate mortgage payments on the free mortgage calculators. I want to do a thru-hike, so I joined a hiking group on Meetup, and I’ll join them for metro park hikes. I also look at gear and guided hike prices.
Whatever your dream, there are lots of little, low cost ways to keep it growing. Once I’m debt free, I won’t be starting from scratch. Also, tending to my dreams helps keep me motivated. After all, isn’t that what life is all about? Pursuing our dreams? Debt freedom wouldn’t mean anything without dreams for the future.
Part Five: I don’t give up.
I’ve had a couple of setbacks. When I started, I really didn’t know how much I’d be able to pay each month. A few really good contract jobs came through, as did Craigslist buyers or extra work, and I’ve been able to make monster payments each month.
One month, though, I had to make a much smaller payment, and my motivation dwindled. Another month, I saw a house for sale that would have been perfect for me…except I wasn’t out of debt yet. I found myself trying to justify the expense by saying, “Well, I’ve got the debt down to $24,000.” I’d reduced the debt alright, but it wasn’t eliminated. I remembered my initial decision and what was essential, and I let the house go. I didn’t pause on the debt payoff. I didn’t give up.
By making the decision to take control of my financial life – by paying off my student loans – I’ve discovered things about myself that I didn’t know before. I feel empowered. I feel capable of making my dreams come true. If I can pay off my loans, what else can I do? I’m excited to find out.