After I finished grad school, I found myself underemployed and buried in $75,000 of student loan debt. I wasn’t sure what to do at first. I briefly considered switching to a 25-year repayment plan until I realized how much I would end up paying in interest.
Thankfully, a friend lent me a copy of one of Dave Ramsey’s personal finance books, and I was hooked. I was intrigued by his debt snowball approach — which involves paying off the smallest debt first while making the minimum payments on the rest of the debts. Next, you move on to the second smallest debt, and so on, until all debt is paid off. Dave’s book and personal finance websites, such as The Financial Diet, inspired me to pay off my debt as soon as possible.
Shortly after my husband and I got married, we came up with a plan to pay off our combined $117,000 of student loans in just three years. To accomplish this, we decided to take a rather extreme approach. We rent a room from my parents, drive 18-year-old cars, have side hustles, and completely cut out spending on most non-essentials. Sticking to a tight budget can be challenging, and some people have told us that don’t need to be this frugal. We chose to take a strict approach for a few key reasons.
1. Our debt to income ratio is high.
When we first began our debt payoff journey, we had six figures of debt and entry-level incomes. My salary was so low that nearly 50% of my net pay was going toward my student loan payments each month. To get out of debt quickly, we needed to take an extreme approach. If we had high incomes or a smaller amount of debt, we could have paid off the debt relatively quickly without being quite so frugal.
2. The less we spend, the sooner we’ll be debt-free.
We could choose to be less frugal and pay off our debt over four to five years (or longer), but we’d prefer to pay off our debt as soon as possible — even if it means sticking to a super strict budget. These short-term sacrifices will lead to long-term rewards. As soon as our loans are paid off, we can focus on other priorities, such as buying a townhouse, saving for retirement, and traveling.
3. We live with my parents.
When we asked my parents if we could rent a room from them for three years, there was an implicit understanding that we would pay off our debt as quickly as we possibly could. If we were to blow through our money on fun stuff, it would be disrespectful to them. The sooner we’re out of debt, the sooner we’ll be moving out of their house.
4. The best things in life are free.
As cheesy as it sounds, the best things in life don’t cost a thing. While money certainly can buy fun experiences, it’s entirely possible to have a good time without spending money. My husband and I still go on dates and get together with friends, but we’ve found free things to do. We like to go for walks, go hiking, check out free yoga classes, attend free events, and have board game nights. Sometimes the free events turn out to be more fun than expensive outings.
5. It reminds me of my values.
When I was younger, I often spent money without thinking about it. I used shopping as a way to cheer myself up when I was feeling down. During my debt payoff journey, I’ve paid attention to the things I miss spending money on…and the things I don’t miss at all. Once we’re debt-free, I’ll definitely be less frugal but I’ll be much more mindful of my spending habits than I was in the past.
I’ll only spend money on things that add value to my life. In some cases, this might mean buying expensive items — which is okay! There’s nothing wrong with spending extra money if I truly want something and I can afford it. Part of why we want to be debt-free is so that we can have the freedom to spend our money how we choose to.
One Last Thought
Many people prefer a more moderate approach to frugality, which is completely understandable. We’ve chosen to stick with strict spending rules because our debt to income ratio is high and we want to pay off our debt as quickly as possible. We’ve also found that this approach allows us to get creative (by finding ways to cut costs and searching for free things to do) and to focus on what we value most.
We’ll be able to start tackling other goals when we’re 100% debt-free. The journey hasn’t always been an easy one, but we’ve learned so much along the way and it will definitely be worth it!
Jen is an HR/Finance professional and frugal lifestyle blogger. Jen and her husband are paying off $117,000 of student loan debt in just three years. She writes about healthy eating on a budget, affordable wedding tips, destroying debt, and living frugally on her blog Frugal Millennial.
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