You can watch part 1 of this video series here -> Click Here for Part #1
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- By Hal Bundrick
If you are tired of having student loans hanging over your head, welcome to the crash course for debt elimination. Our syllabus is simple, the course objective has been plainly stated and grading will be based on a pass/fail basis. Let’s begin.
What’s the rush?
You may be wondering why we have defined such a short period of time to pay off a substantial debt. After all, The Institute for College Access & Success says the average student loan balance was $29,400, which is based on the latest data available for the class of 2012. With a supersized debt of that magnitude, you need a lot of time, right? Yes, but a lack of urgency can encourage complacency, and with time the debt will grow even larger.
This may light a fire: Calculate the amount of interest you will pay by only making minimum payments on your student loans. If you can’t put your hands on the statements for your loans, check the National Student Loan Data System to retrieve your loan information.
It’s quite likely you’ll be surprised by the big number you discover. You might even find you’ll be paying as much interest on your loans as the original principal amount.
Putting a short fuse on the debt bomb will inspire a significant financial turnaround. Once you retire the student loans, imagine the boost to your cash flow. You might even feel affluent for a change. With those monthly payments gone, you can focus on buying a home, saving for retirement, paying for a wedding and all the other good things in life. No student loan debt means you can kiss Sallie Mae goodbye. You’ll feel like a different person, with less stress and real financial freedom.
Debt limits options
While the task may seem insurmountable, consider the Harvard University alum who paid off $90,000 in graduate school debt — in seven months. Joe Mihalic is a supply chain manager in Austin, Texas now, but three years ago he was deep in debt and desperate to get out.
“I simply felt an overwhelming feeling of being trapped,” Mihalic, author of “Destroy Student Debt: A Combat Guide to Freedom,” wrote in an email. “I felt that the debt was severely limiting my options, and I realized I would never be truly free unless I became debt-free.”
By committing to a frugal lifestyle and squeezing every bit out of his annual salary, which was less than the balance on the loans, Mihalic accomplished his goal of rapid debt reduction.
“I didn’t start feeling weighed down by my debt until my self-esteem finally reached a level where I didn’t need to constantly spend money to feel good about myself,” he writes. “At that point, the negative feelings associated with my debt were greater than the positive feelings associated with consumption. Only then did I seek out a life of frugality and living below my means.”
A cash budget is key
And consider Jackie Ritz, a Paleo diet aficionado from North Carolina who blogs at ThePaleoMama.com. She and her husband paid off $50,000 worth of debt in 10 months.
“We sat down one night and wrote down all of our debt, including our student loan debt, which was the most baggage,” she wrote in an email. “My husband had carried his student loan debt the past 15 years, and we wondered how long we were going to let that debt keep following along with us. So in order to have financial freedom we knew we were going to have to be more aggressive in paying the student loans down and turn our minimum payments into the maximum amount we could manage in our budget.”
Ritz adds that sticking to a cash budget was the key.
“During this time, we made a budget for all our expenses and used the ‘envelope system’,” she explains. “You place the week’s worth of money in your envelopes and when the cash is out, it’s out! This was probably the hardest part of it all since we were so used to swiping our debit or credit card without even thinking about a budget.”
By Gerri Detweiler
Money problems can be distressing and depressing. We recently heard from a college graduate who feels overwhelmed by debt:
What can I do about student loans? I owe about $150,000 and only make $36,000. I’m also looking for a new job that hopefully pays more. I feel stuck and miserable. I went to college to better myself but instead of feeling improved, I have this huge burden on my shoulders. All I do is work and pay bills, work and pay bills, work and pay bills. Help me, please!
We asked finance expert and writer (and contributor for Credit.com) Mitchell Weiss about our reader’s plight. Unfortunately the news wasn’t encouraging.
The writer may be entitled to some government-backed repayment plans, such as income-based repayment (IBR) or Pay As You Earn (PAYE) programs. But, Weiss cautioned, those are available only for federal loans; they are not available for private loans. If he works in the public domain, our reader might be eligible for the Public Service Loan Forgiveness Program.
“As far as his/her private loans are concerned, it’ll be case by case with the lenders,” Weiss said in an email. “Just know that any accommodation will come at a price — unpaid interest will be added to the loan balance (this is known as ‘negative amortization’), which will only make matters worse.”
Heather Sokol via babble.com
One of the most important things to financial peace is having a savings account with funds available for emergencies. But, there are bills to pay and unexpected expenses and kids who eat you out of house and home.
It’s so hard to break the cycle and get to the point of having money to put away. Most experts will tell you to “pay yourself first,” meaning add to your savings before you even pay bills or spend any money.
That sounds like a great idea, in theory. But if money is already tight every month, it is just not going to be realistic. Instead, try to find simple ways to save just a little bit every week.
Here are 5 sneaky ways to save money you’ll barely miss:
1. The Round-Up: For each purchase you make, round up to the nearest dollar in your check register. You may only be saving pennies at a time, but it gives the checkbook easier math and adds up over time. At the end of each day, week, or month, you can transfer the money to your savings account. Some banks even have special checking accounts that will do this for you automatically.
Related: 7 steps to a better budget this year
2. The Impulse Savings Plan: Whenever you make an impulse purchase, transfer the same amount to your savings account. This impulse savings plan can help your budget in two ways. Not only are you adding to your savings account with each impulse purchase, but you may find yourself spending less money if your impulse buy isn’t actually worth double. Another idea would be to put the money into savings every time you stop yourself from making an unplanned purchase.
This is an article I found to be very insightful with regards to habits practiced by financially successful people. How many of these do you incorporate into your life?
The secret to finding financial success has been something that has eluded many of us for our entire lives. Yet there are multitudes of individuals who enjoy a comfortable life due to their financial success. As it turns out, many of these financially successful people all have certain habits in common with each other. Here is a list of the top 20 key habits that financially successful people employ.
1. They establish and follow a budget.
Being able to plan ahead for your financial needs and setting limits on certain spending types will almost always result in better results in the long run. Anyone can make a budget, but staying disciplined enough to follow it is more difficult.
2. They keep their recurring, monthly expenses to a minimum.
Along with making and keeping that budget, they also evaluate their monthly costs and reduce them when possible. By avoiding this unnecessary spending they allow a larger portion of their income to go towards saving.
3. They have a healthy financial education.
Financially successful people are well aware of the current economic trends and are constantly increasing their knowledge so that they are able to make the right decisions when it comes to managing their money.