As of today, I’m proud/pleased/excited to say that I’m 100% free of debt! No more student loans, credit card balances, auto loans, or anything like that! I paid more than $8,000 off in loans this year, and it feels great to be free for the first time in 8 years.
I’m free!!!! (just like in Shawshank Redemption)
My Debt-Free Strategy
1. Keep debt low from the start and don’t take on new debt. The easiest way to get rid of debt is to never get in it in the first place. Some of the ways I avoided debt were:
- Went to a state college (UMass) instead of an expensive university that would’ve cost more than twice as much
- Applied for and was awarded a teaching assistant for graduate school, which paid for my tuition as well as a stipend
- Stuck with used cars (after making the mistake of financing a new car at age 18)
- Giving up credit cards so that I don’t run the risk of carrying a balance no matter what happens
2. Set a solid goal. I wanted to be 100% debt free by the end of 2011, and I made sure to stick to that goal. It’s part of a much bigger goal, actually, and it’s an important first step in a series of other goals. With this goal I paid off over $8,000 worth this year.
3. Make it a priority to pay down debt. I knew that I wanted to pay off all my debt before I quit my job and went on any other big, new adventures. I really hate the pressure of making monthly payments, so it was a must to get rid of all debt before I embark on my next journey.
3. Automize. I made it impossible to miss my goal of paying off balances by setting up automatic payments from my checking account to my loan servicing company. I set this up to occur every payday (I get paid twice a month), and I worked backwards from my debt-free date to figure out the payment I’d need to make each time.
It worked out to about $1,100 a month that I needed to pay (which is around one-third of my net pay at my job). It wasn’t the easiest amount to apply towards debt each time, but it was more important than anything else I could spend my money on.
5. Make it a priority to earn more. Over the last month I’ve made a few hundred dollars on Money Spruce (while being careful not to take away from the reader experience at all). This is part of my larger strategy to diversify my income through both this blog and other freelance writing and Search Engine Optimization (SEO) work.
I realize my debt was at a fairly low interest rate (6.8%), and I hope I didn’t end up in a situation like Todd. However the size of my debt was pretty small, and it really motivated me not to spend when I set the goal to pay off the debt. Perhaps it wasn’t the best thing I could do with my money financially, but I still think it was the right choice.
Now that my debt is gone, I’m going to take those monthly payments I was making (about $1,100) and put it in my “Quit My Job” fund. It’s easy to do this since I already know that I can live without this money, and I’m thinking I should get more aggressive and save at least a few hundred dollars more than that each month.
Did you pay off debt in 2011? What strategies worked for you?
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