Wednesday, June 11, 2014

Reflections on Debt

Some conversations will stick with you for your entire life.  It was back in 1997 when a friend said "oh I charged the flight to Colorado to go skiing -- I'm so far in debt I will never get out, so why bother trying to live within a budget."  She had a nice time on that trip, but today I wonder what kind of stress she must have if she still lives by the assumption debt is a way of life?

After finishing 9 years of higher education, I left school with a BA, MPA and JD.  I also have $97,000 in student debt.  That was May of 2001, and within 6 years it was gone.  I did not win the lottery.  I did not score a six figure job with a huge law firm, I used my law degree to work in public policy.  I did not inherit a huge sum or marry of man of independent wealth.  What did I do? I lived below my means.  I spend less, far less than I earned.  And I sent a check each and every week to my student loan servicer.  Why each week? The faster I whittled down the principal, the less interest I paid.   The less interest I paid the more that went to principal.  It was a vicious cycle, but one in my favor.

Today as new batch of grads walk into the world.  Student loan reform is in the news.  Whether you are the student needing to pay back debt or the parent of young children saving for a future education (that is the boat I am in today), here are 10 things you can do immediately.

  1. Eat at home instead of out.
  2. Eat food in it's most natural state, the less processed the better.
  3. Enjoy nature and avoid the mall.
  4. Bike or walk to work or errands, and leave the car at home.
  5. Cancel what is not necessary -- from subscriptions to vacations to memberships.  Do you really need all of that?
  6. Sell things and put the money toward your debt or savings.  Garage sales, ebay, craigslist, Amazon, and I'm sure there are more.
  7. If you have spare time, turn it into money.  Dog walk, babysit, house sit, tutor, deliver pizza, sign up for extra shifts.  You'll be busy earning more money, and too busy to spend it.
  8. Accept that not spending money is the true bargain, not something marked down 50%.
  9. Learn about the power of index funds, especially if you are investing in 529s for future college expenses.
  10. Avoid shinny and large stores, and hit the 2nd hand thrift stores instead.
Thanks for reading, and leave a comment if you have a tip to inspire others or me -- I am always seeking new ways to live the frugal life.

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