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It may seem hard for Wisconsinsites to imagine, but May graduations are just around the corner. In the blink of an eye the snow will not only stop falling, but melt and give way to Spring flowers and green grass. Sitting in my office this week one of the law students who works with me said "wow, I meet with the financial person at the law school today....and we ran the numbers on what I need to do to pay off my loans." Clearly deflated by the reality of the numbers I quickly said, "hey I paid off $97K in 6 years and didn't work for a huge firm, but a government agency! It is not as hard as you think!" Looking up from her computer she asked "how did you do it?" And I launched into an afternoon of client meetings punctuated with a tip here and there. What follows is my advice to recent grads, or anyone facing a mountain of debt.
One -- get mad at the debt. Don't accept it as a fact of life. No, be determined to rid it from your life. This took me awhile myself, but after jumping through hoops in hopes of a reduced interest rate, and constantly told "oh sorry, the agent who told you that was mistaken" I got fed up with my loan processor. That focused my actions, and what was supposed to be paid off in 30 years was gone in six!
Two -- before tackling debt establish a small emergency fund. Life happens, and you don't want to rely on credit cards with sky high interest rates to get you through the hard times. I'd suggest somewhere between $1,000 and $3,000. Fund it by selling items you don't need or want, not spending graduation gift money, and any other way you can think of. If you use it for an emergency, build it back up before turning back to debt payment.
Three -- stay motivated. I used to listen to Dave Ramsey's radio show (in fact numbers one and two are straight from his playbook). I did not agree with his conservative religious view points, but we see eye to eye on operating in cash, living within your means, and disliking the cycle of debt. Look for blogs, books, and even simplicity groups. You'll find strength in numbers.
Four -- moonlight! Sure you may have a job, but get another. I find that when I am working I am not spending money. Down time often leads to relaxation and fun, which is not cheap. Very flexible options are: babysitting, pet sitting, yard work, running errands for someone who can't, cleaning houses, tutoring and or editing (great if you are in a college town). In addition to my government job, I tutored on nights and weekends.
Five -- sell your stuff! Clothing went to consignment stores. Childhood toys were sold on Ebay (I'm still shocked at what people paid for 1970s Barbie items). Put it on Craigslist. Hold a garage sale. People love to shop, and you'd be surprised at what they sell. The less you own, the less space you need....and space costs money.
Six -- send money every week to the processor. Don't wait for the day of the month the processor will pull your minimum payment. Get extra coupons and send money each week. You'll decrease the chance you'll spend it on something else, and the lower the principal the lower the interest you'll pay. I highly recommend a spreadsheet to track payments and keep the companies honest. Irregular payments can cause them confusion. At one point the company with my loan was holding them until the 25th....I had to call and say apply it today. This mattered because I knew my loans were kicking off $20 interest a day!
Seven -- commit to a few years of living like a poor college student. For some they may have never lived like a poor student, so this could be a shock. A few of my favorites are:
- no car! Walk, bus, use public transit, ride a bike. If you own a car, keep it inexpensive and make sure you are not dependent on it. You'll save tons on gas, insurance, upkeep, parking and more.
- brown bag it. Graduation does not turn into 3 martini lunches. Bring your lunch from home, and coffee, tea or other beverages. Yes food from home does cost money, but far less than $12 at Panera.
- Line dry clothing. Electric dryers are not efficient. Get a drying rack and use the rod in your shower to dry clothes.
- Live with roommates. Shave costs in half or more, but make sure you are living with people who are frugal. If they order pizza every night and blow money at the bars, it will be a stress on your debt load.
- Learn to cook. If it is prepared by someone, you are paying more. Avoid restaurants, and prepared meals in the stores. Learn to cook 5 or 6 basic meals. Eggs, veggies, rice, beans....great sources of protein that won't break the bank; and
- Embrace thrift store shopping. You may have an education, but you don't need to shop at the mall to look professional. Thrift stores are not only abundant, but hip. I'll never forget the dove gray Banana Republic pant suit I found for $17 at Goodwill. Every time I wore it, my boss commented on how lovely it was. She had no idea.
Oh, I could go on and on, but that is what this blog is all about. My debt may be long gone and my frugal ways have morphed to reflect my life as a wife, mother, homeowner and business owner. But my frugal ways can be applied to many phases of life. Thanks for reading!