The day I graduated from my Master’s program I was riddled with mixed emotions. On one hand I had successfully graduated with an above average GPA, while on the other hand I was still looking for a job in the midst of a financial recession with an outstanding student debt. The fear of living in debt always haunted me and I was persistent to look for a job regardless of the high rate of rejections coming my way. I had a Master’s degree but there was a severe dearth of jobs requiring my skill set.
Three months after my graduation I finally started working as an intern at one of the top software firms. After a little over a year I had completely paid off my entire student loan to experience one of the best feelings in my life – LIBERATION! Being free from debt is not only a massive burden off your shoulders, but it allows you to eventually venture into areas that truly interest you. There is a total of $1.5 trillion student debt in the year 2018 with an average $28,446 student debt in 2016. Looking at these numbers was encouragement enough to share how I was not only able to pay off my loans, but save a substantial amount of money to secure a future.
1. DO NOT GIVE IN TO PEER PRESSURE
Many of my fellow graduates went insane the moment they landed a job and head straight to their car dealerships to purchase their latest swanky ride to work. While it sounds amazing to drive to work in a brand new Audi or even an Altima, one must realize that this will only add to your debt. This is going to significantly impact your NET paycheck amount, because every month you will be paying a hefty amount towards this new purchase. Some car companies even offer 0% financing for new graduates, but do NOT be tricked into another bucket of debt! Use your common sense before making any such large purchase. It may be amazing to have the latest car, gadget, phone or television, but this is truly not the time for it. Tell yourself that “this can wait”. Personally, I settled with a second hand Nissan Sentra, for which I did not have to go to the bank for a financing option. I was riding my own car from day 1 and my debt numbers did not go up!
2. REALIZE THAT LOAN INTEREST RATE CAN WIPE OUT YOUR EARNINGS
Most students start out with making the minimum payments towards their loan, not realizing how much interest is accumulated over the entire period of the loan. Let me give an example, say you owe $35,000 and the bank’s interest rate is 6.8%. The bank will spread out your payments over 10 years and your monthly payment will be only $403. Most of us feel comfortable with these tiny payments spread out over a long duration but do not realize how much we end up paying in total. Let’s calculate the total amount :
Monthly payment = $403
Number of payments = 10(years) x 12(months) = 120
Total payment = 403 x 120 = $ 48,360!!
The total interest paid will be over $13,000 which is nearly worth 5 months pay for an average bachelors salary. Realize that paying interest over several years will only hurt your finances and the sooner you pay, the more you save!
3. WORK HARD TO EARN A RAISE
When I started working, I was an intern for the first six months of my job. During these six months I worked really hard to make sure I was offered a full time position, which meant a higher number on my paycheck with additional benefits with respect to health insurance, vacation and retirement plans. It is truly important to strive for that promotion and not get too comfortable in your office chair. Learn a new skill, show that enthusiasm, speak out your ideas – but do not stop! Because it is this perseverance that will prevent you from letting a student debt be the master of you!
4. DON’T GO SOLO
It may be tempting to leave the shared apartment and start living by yourself after landing a job, but doing so can make a huge dent in your paycheck. The moment you start living alone, all your expenses will be twice as much at a minimum. Saving on monthly rent itself is a huge bonus when living with roommates, while splitting the utility bills is the additional bonus. If you have a student loan to pay off, hold off on terminating that roommate agreement until you are close enough to paying off your debt completely. This strategy alone, can save you several thousand dollars, and most important of all, save your TIME invested into dealing with this debt!
5. PARTY ANIMALS, ARE WE?
If your eyes sparkle at the thought of crazy parties with drinks over the weekend, then it’s about time to shut those eyes! There is no harm in partying once in a while, but if every weekend involves expensive dinners and alcohol, it can distract you from reaching your ultimate goal of being debt free. This does not mean you go anti-social and start living in a shell. Try a simpler outing for a change, explain to your friends about the priorities in your life at this time to avoid being shunned from all gatherings and make the most of your time. You may end up even helping your friends in this process to pay off their loans and make their life better.
6. FIND A SPOTTER
Imagine how often you need that spotter at the gym to help you push that heaviest weight and motivate you. Similarly, it helps when you have a spotter who is in a similar position of debt as you and wishes to attain the same goals. A journey is always better with a companion, especially when the journey is difficult. Constantly motivating each other, from avoiding that large purchase to constant reminders to conversations discussing what you would do after paying off that loan will help you get there sooner. Find that buddy right away!
And lastly …
7. PICTURE YOURSELF DEBT FREE EACH DAY
Every single day picture how you would feel the day you are debt free. Imagine the goals you wish to accomplish soon after you have made that last payment. Have follow up goals that will keep you in line with your current goal.
That goal to be financially independent …
After I paid off my loan, I stuck to these principles and realized I still wasn’t overly attracted to small bursts of excitement from large purchases. I wished to be financially independent and continued saving aggressively and wished to travel as much as I can. I started making small investments to ensure that my money had started working for me as one day the idea of living paycheck to paycheck will be obsolete. In this span I was promoted twice at work, made a few small changes to lifestyle by living alone, getting that new car and even traveled to 10 countries!! But constantly reminding myself that being frugal pays off in the end!!
Don’t let pride keep you in debt. A big house and a fancy car aren’t worth a lifetime of bondage
Be Frugal, Be Smart, Be Rich!