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Financial Literacy

My Debt Journey – Tackling $50,000 in Debt

(Bad) Debt sucks.

On this path to financial freedom and becoming well-versed in financial literacy, I decided that I needed to tackle the beast that is my debt.

This is the first time I’m sitting down and acknowledging, in black and white, what that number looks like. I make my (minimum) monthly payments and I know, roughly, when they’ll be paid off, but I need to start doing more to get this number significantly down and GONE.

I used to have the mentality that I didn’t want to give more money than I had to to debts like this. But now I’m starting to think differently.

After reading Playing With Fire by Scott Rieckens, I downloaded the money management app, Mint, which is a part of the Intuit family. Before then, I never thought twice about my net worth. At 24, I didn’t think it’d be anything significant, but I at least thought it’d be in the positives.

NO I WAS WRONG. THANKS MINT.

There is was, in all its glory:

-$42,407 (total debt minus any savings/investments).

Not only do I have a net worth, it’s a negative net worth. This opened my eyes to re-evaluate what I’m doing with my finances and make strides to kick poor habits (those credits cards are purely consumer debt).

I’d encourage everyone to know their net worth. Having calculated my own opened my eyes to change course on where I was heading.

My Debt Breakdown

My debt is essentially broken up into three categories: student loans, credit cards, and my car.

  • Student Loans: $26,476.74
    • There’s a total of seven loans I had to take out during my college career. This is their breakdown:
      • Subsidized Stafford Loan – $5,435.98 with a fixed interest rate of 4.29%
      • Subsidized Stafford Loan – $2,224.76 with a fixed interest rate of 4.29%
      • Subsidized Stafford Loan – $5,425.83 with a fixed interest rate of 3.76%
      • Unsubsidized Stafford Loan – $7,407.66 with a fixed interest rate of 3.76%
      • Subsidized Stafford Loan – $2,719.25 with a fixed interest rate of 4.45%
      • Unsubsidized Stafford Loan – $1,038.42 with a fixed interest rate of 4.45%
      • Subsidized Stafford Loan – $2,224.84 with a fixed interest rate of 4.45%

What’s the difference between subsidized vs unsubsidized loans? With subsidized loans, the U.S. Department of Education absorbs the interest rate on the loans while you’re in school and six months post-graduation. With unsubsidized loans, the opposite is happening – you’re accruing interest on the loans while you’re still in school.

  • Credit Cards: $7,433.11
  • Car Loan: $15,813.59
    • I drive a 2013 Honda Accord and I’m ashamed that I have such a high car note. This was also the result of poor car-buying choices when I first started driving, so here we are today…

TOTAL: $49,723.44

So while it could be worse…it could be better. A LOT better. And that’s what I’m working towards.

I calculated this manually, but Dave Ramsey has a Debt Payoff Calendar that will calculate your debt in these categories (car, student loans, and credit cards) and show you how long it will take to pay off everything if you continue to make just the monthly payments.

I’m guilty of only making the minimum payments, and not contributing much to cutting this down quicker. After putting in my numbers, I gasped:

Dave Ramsey debt calculator results
Results from Dave Ramsey’s Debt Payoff Calculator

NO THANKS.

Cutting Down the Debt

In order to make a serious dent in my debt and get out of it quicker, I need to make a sacrifice. For me, that looks like doubling up my payments each month when I’d much rather take those dollars and save them.

While this will tap into my disposable income significantly, I don’t like having a negative net worth, and I don’t like the idea of being close to $50,000 in debt. And I’m not even a homeowner yet.

This also means I stop spending so much money on eating out – I hate cooking but guess I have to learn to like it now?!?! This also means cutting back on makeup splurges (I easily spent $50+ every time I walk into a Sephora or Ulta).

What this also means is finding additional ways to bring in more income. Whether that’s cutting back on expenses where I can so it “saves” me more money, putting more hours into Door Dash, or some other form of hustlin’, I’m ready.

I’ve seen people follow different methods to pay their debts down. Some opt to pay off the debts with the highest interest rates first. Others opt to pursue what’s called the debt snowball method. Basically, you pay off the smallest amounts first, and work your way up. Tackling your total debt can be incredibly intimidating and overwhelming, so the psychology behind this is that paying off small debts one-by-one helps build the confidence to tackle bigger ones and help you see that total balance go down.

Personally, this is the method I prefer, too. This is how I plan to attack my boulder of debt.

Debt Payoff Progression

  • 6/20/2019 – $502 towards debt payoff! (Two credit cards GONE and $45 more towards monthly student loans!)
  • 8/17/2020 – My car loan currently sits at $9,870! Not much of a dent in my student loans. Total currently is $25,752.

Are you currently paying down your debts? Have you payed off a large debt? I would love to hear your story!

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