Wow, you have made your way back to read the second portion of my ramblings. I want to thank you and apologize at the same time because you have either found what you read to be intriguing and want to hear more or you really hated what I wrote AF. This is entry number two so if you are starting here for the love of God go back and read the first one because you’re reading out of order.
Baby napping: check. Wife happy: check. Now I can continue to write. I am sure by now you want to know a little about me. That’s only natural. Instead of boring you with my life story I am going to incorporate a little bit about myself at the beginning of the entries and how it pushed me into writing about finances, budgets and other fun topics.
When I was in high school I had the pleasure of being told by my guidance councilors that the results of all those career guidance tests showed, very specifically, that I could do whatever I wanted. Cool right? You’re smart, have fun and enjoy whatever career path you decide on. Little did they know that would set me up to attend three different universities with three, wait maybe four, different majors over the next six years. Yea, guidance my ass.
Truthfully, it was in large part my own fault and very little of the guidance councilors. I had no clue how to study at the collegiate level and somebody in the dorm always wanted to play basketball or dodgeball or go partying. I couldn’t say “No”. That would just be rude. So my freshman and sophomore years were spent more as life lessons 101 to the tune of $40,000 a year at a private school that was just not for me.
Let’s be honest here; life lessons 101 is an invaluable part of the adult curriculum to eventually be a successful and productive member of society. Both my parents being first generation college graduates; reluctantly understood what I was going through. You learn and grow by leaps and bounds when you finally leave the nest and I would learn even more 6 months after graduation when my first loan payments would come due. I am sure I could have learned very similar life lessons for a more reasonable price. Totally not the frugal route and very much un-Beer and Budgets of me. Please forgive me. I was young, inexperienced (oh God Keystone Light and Natty Ice flashbacks) and still in my frugal formative years.
Schools loans both Federal and private are a hot topic among all generations whether you have attended any form of higher education or not. They even go as far as to dominate our 24 hour news network headlines every so often. We will go into the intricacies of school loans in later posts. Here we are going to go into some simple and efficient ways to pay these stupid things off.
There are two commonly known methods for paying off any type of debt; the Avalanche Method and the Snowball Method. There are other methods available that you can Google; but these are the two that I am familiar with and have personally used to help pay down my debt over the years. They both work well with student loans because these two methods are built around the idea that you should have multiple loans from multiple lenders. Combine them with your auto loans and credit cards for maximum personal benefit. I am not going to try and BS you. They both require dedication and a little sacrifice to work. If you are unwilling to put in the time, money and effort than you really need to get your crap together and kick some debt ass or come back when you are ready to do work. Becoming student loan free, or debt free entirely, is an awesome accomplishment in this age where you can finance anything like your cell phone and have credit cards with 25% APR.
The Avalanche method focuses on your highest interest rate loans first. Paying these loans down first with most of your spare money (remember to save money for a beer or six) will help you save hundreds or thousands of dollars in interest over the long haul. This is typically regarded as the best method to pay off your loans. Overall you will be able to screw the lenders out of the most money in interest payments in the shortest amount of time. Haha, screw you lenders! Ok, sorry lets focus. You will be able to put this money back in your own pocket for a good Crème Brûlée from Southern Tier or do something crazy like invest in some low expense ratio index funds for your future. I recommend Vanguard or Fidelity because you can totally buy a ton of cool brews with 30 years worth of growth and dividends! This method can feel like a daunting task at first. It really, really requires dedication, patience, and commitment. The downsides that I have found to this method is if your loans with the highest balances are also the ones with the highest rates. This can cause people to become quickly discouraged and abandon the plan. Stick with it though and you will reap great rewards.
The Snowball method is a plan based around starting small and taking that money you would normally use to upgrade to the iPhone 74S, or whatever version we are on now, and instead use that to chip away at the loans you have with the smallest balance. The idea is to pay these smaller loans off quickly and roll (get it, snowball!) the money that you used to pay the monthly payment on the smaller loans into the larger ones. You would continue this process until by the end you are splashing such large amounts of cash at the larger loans every month that towards the end of your repayment term your lenders will be crapping their pants about how little interest you are paying them. You will cause them to run back into whatever deep, dark hole they call a boardroom and curse your name. As you can tell I like this method a lot. What you make up for in paying a little more in interest over the long term than the Avalanche method you make up for in a psychological boost. The feeling of sending that last payment of even your first smallest loan into your lender will build confidence to say “GTFO school debt” and hopefully encourage you to continue on your quest of student debt repayment until you are finally free!
Now that you know a little more on how to kick school debt’s butt; you can use whatever method works best for you. When tackling my ridiculous school debt, which by the way I still have a little bit, I used a blended method. I organized my loans by size and then if I had a few that were all within a few thousand dollars of each other I prioritized the loan with the highest rate and then went to battle from there. Make a commitment to yourself to become debt free of your student loans. It is easy to take the new money you have saved from your monthly payments after you pay off a loan and totally blow it. I strongly encourage you to not to freaking do that! Set small realistic goals for yourself and reward yourself throughout the process. Pay off a small loan; order out tonight. Pay off another; buy your significant other something nice. He or she has been putting up with your crap while you have waged an all out war on your student debt. Pay off that last loan….buy a case of your favorite beer and subscribe to a wealth management magazine like Kiplinger so that you can now put all those monthly payments you have been throwing at your loans to good use for your future self.
Today’s Beer of the Blog is Stone Brewing Company’s Mint Coffee Milk Stout. The mint tingles as it first hits your palate and almost immediately subsides giving way to the creamy milk stout. It leaves a wonderful bittersweet coffee flavor in your mouth that slowly grows on you making you crave more. It is Girl Scout cookie season and this is pretty damn close to a liquid Thin Mint. Cheers!