Student Loan Debt Sucks But It Can Be Destroyed

student loan debtWhen my wife graduated from college with her four year nursing degree in 2011 she graduated with over $80,000 in student loan debt. It was a heavy burden for both my wife (girlfriend at the time) and myself. We knew it was a ton of debt and that it’d likely take a super long time to pay off.

Back then our minimum payments were right around $700 a month which was a ton of money. In fact, it was even more than our first ever house payment. We knew we wouldn’t want to pay that debt off for over a decade or longer, so instead of wallowing in our sorrows of our massive debt load we made a plan to pay it off as quick as possible.

Made A Budget

The first thing we did was make a budget. Since we weren’t married at the time, we actually made two budgets, one for myself and one for my wife. Our budget was pretty strict but it was in line with our #1 financial goal of destroying her student loan debt.

Any money that we ran into, whether it was a cash gift or our paycheck, that wasn’t in our budgeted spending got put immediately to pay off my wife’s student loans. The surplus in my budget got put into a savings account to pay her loans down once we got married. Sometimes we’d make as many as four payments to her highest interest rate student loan in one month!

Unfortunately, with just the income from our jobs it would still take many years to pay off the massive amount of student loan debt so we looked at ways to speed up the process. We found a couple ways to make more income that ended up helping us out a ton.

Finding Extra Income

We wanted the debt gone and the quickest way to pay more money toward that debt was to find extra income. Once Tori finally got a job we had her base income to put toward the student loan debt. I already had a job, but I was a salaried employee so I couldn’t work extra hours to earn more money.

Tori, however, was an hourly worked which meant she could pick up extra shifts at work to earn some more money. On top of that, if she worked over 80 hours in a pay period she earned overtime at 1.5 time her base pay which was pretty sweet. Tori picked up extra shifts when she could and we put all of the extra money toward extra student loan payments.

I wanted to help in the debt pay off journey, so I brainstormed some ways to earn some extra money. I got a new job that resulted in a higher salary and less hours which was pretty sweet. Working less allowed me to start doing something I had always wanted to do, start a blog.

I never thought it’d end up making money from my blog, but with a lot of hard work and a bit of luck we started making money! It was exciting because it meant I had found a way to contribute toward paying down the student loan debt.

Both sticking to our budget and finding extra income helped us to pay off Tori’s debt very quickly. In fact, we managed to finish paying off her student loans this year in less than 3 years total!

Did you graduate with ton of student loan debt, or did you graduate debt free like I did? Either way, I’d love to hear your stories about your money adventures. Shoot me an email (adventuringdollars at gmail dot com) or leave a comment below!

Photo courtesy of jscreationzs via freedigitalphotos.net.

Can You Get A House For A Car Payment? You Bet!

house-less-than-carHave you seen some of the crazy car payments people have today? These days people are buying cars that are way out of their price range. If it isn’t bad enough that people buy overly expensive cars, then consider this. People no longer finance cars for only 3 years, but instead finance cars for 5, 6 or even 7 years.  Take this car loan and payment, for example:

  • $30,000 car loan
  • Payable over 5 years!
  • 2.9% interest rate
  • $537.73 payment per month

A huge part of America wouldn’t even blink at a car payment this big. They’d accept it as a part of life and move on. The thing is, they have no clue what they’re missing.

Believe it or not, you can get a mortgage and own a house for less than the payment on this car. How do I know? I’ve done itYou could have a house for a similar monthly payment and at the end of the loan you’d actually own something worth more than when you bought it! Of course, your loan will last longer than 5 years, but the monthly payment will be the same or less!

What You Get When You Buy A Car

When you buy a car, you’re buying transportation that will take you from point A to point B. Your car has a distinct purpose and can save you a ton of time over other transportation options. However, cars have a pretty defined useful life and as you use your car, its value will decline slowly until the car falls apart and is worthless. Cars depreciate over time and in the end you sell the car for much less than you pay for it.

Instead You Could Get A House

A few years ago, I wouldn’t have thought it was possible to buy a house for less than a car payment, but I was wrong and I actually did it myself! Here’s an example that actually cost more than my house did:

  • House Sales Price: $100,000
  • Down Payment: $20,000
  • Loan Term: 30 years
  • Interest Rate: 4.50%
  • Payment (before insurance and taxes): $405.35

That’s over $130 less per month than the car payment above! Crazy! Now, keep in mind you will have to pay insurance and taxes. You’ll have to maintain your home. However, in the end you’ll own a house and the home will be worth a ton more than that car that would be 30 years old.

Before you start complaining that buying a $100,000 home is impossible, let me point out that it is possible and the only thing stopping you is yourself and your choices. The house probably won’t be huge and it definitely won’t be in a major metro area. It can in fact be a very nice house, it just might be in a different part of the country.

Considering that housing is normally one of the most expensive parts of a person’s budget, if you move to a cheaper area of the country to buy a cheaper home you can probably take a pay cut and still end up financially ahead. It is possible to have a house payment that’s less than a car payment and I’ve done it!

Have you ever had a house payment that is smaller than a typical car payment? Were you shocked that it is possible?

Picture by: 401(k) 2013 Text added by: Lance Cothern

Buy A New Car Every Few Years Or Get Rich? Your Choice

Cars in Bella Center 2006Cars are an interesting phenomenon in the United States. I’d say most Americans believe that they are defined by their cars. As such, they want a car that they think fits the image they want for themselves. Whether you’re buying a sports car to make up for something you’re lacking or a luxury sedan to make up for the fact you can’t really afford one, people don’t make the best money decisions when it comes to buying cars.

Why Do People Buy Cars They Can’t Afford?

People buy cars they can’t afford because no one told them they can’t really afford them. Cars are EXPENSIVE. You’re spending a ton more on cars than you think. For example, have you ever thought of the cost of buying your car in the first place, the cost to drive the car, maintain and insure your car all at the same time? Few people have. When they do, it can be an eye opener.

On top of that, most people never take the time to think about the fact that they’re going into consumer debt to buy a newer, fancier, more awesome car. They’re giving up their future money and time to drive a different car than they previously had. Even if that old car worked just fine and the only reason they bought a new car was because they wanted something different.

I hope I can make sure you don’t fall into this trap.

The Real Reason You Own A Car

Most people glance over the real reason why they own a car every single time they shop for a car. The purpose of a car is transportation. It gets you from point A to point B and maybe point C if you’re going on a longer trip.

Corporate America and car makers don’t want you to remember that cars are for transportation. They want you to see cars as a status symbol. They want you to equate your car to your success in life. They want you to be proud of your car and pay a ton of money for completely unnecessary features that are purely cosmetic and serve no real purpose other than increasing the cool factor of your ride.

Don’t let corporate America decide why you need a car and what you need in a car. Remember, cars are for transportation. Anything above transportation is spending more money and time to get places in style or comfort. Some is worth the extra cost depending on your wants. Just don’t let society tell you what is valuable to you. That’s for you to decide.

The Benefit Of Realizing A Car Is For Transportation

Once you realize that which car you buy is a huge choice, you can now determine how much money you truly want to spend on a car. Spend as much or as little on a car as you want, just make sure it fits in line with your values.

If you end up spending less on cars and buy cars less frequently, you can save a ton of money over the future decades of your life. Invest it and you could be shocked by the tens or hundreds of thousands of dollars that could end up in your investment portfolio.

Have you realized how much money you spend on cars? Have you decided it is worth it, or have you decided to cut your transportation spending?

photo by: Maltesen

3 Different Types of Budgets For Different Types of People

Envelope of CashBudgets often get a bad name. Why? Because when people talk about budgets, they’re normally talking about restricting your spending. Budgets don’t have to be all bad and you don’t have to use them to restrict spending if you don’t want to. Instead, I want to share some of the more flexible budgets you can use while still monitoring your money.

50/30/20 Budget

This budget is pretty easy to follow. All you have to do is simply take your after tax income and apply some percentages to it. You guessed it, the percentages are 50%, 30% and 20%.

The first category, your needs, is where you’ll spend 50% of your after tax income. You’ll use this money for things like your housing, basic groceries, basic transportation and your other basic needs. Notice these are the basics only, nothing upgraded or fancy here. Those come in the next category.

Wants are the second largest category of this budget at 30%. Wants are things like cell phones, dining out and other things you don’t absolutely need to live your every day life. People easily get confused here and consider many wants as needs, but if you COULD live without it, chances are it is probably a want and not a need.

The smallest category is the most important. Coming in at 20%, this category is for your savings and debt repayment. Personally, I prefer to increase this category to more than 20% of my budget, but if you’re following this model exactly, you’d only save or pay off debt with 20% of your income. This doesn’t include your mortgage, but instead is debt like student loans, car loans, and other consumer debt.

As you can see, this budget is pretty flexible and allows for you to spend your money on what is most important to you in your life. It adds up to 100% of your after-tax income and doesn’t involve going into debt.

Customized Budget

A customized budget is whatever works best for you. It is even less strict than the 50/30/20 budget because it allows you to base your budget on your personal needs.

If you have a ton of debt, you’ll likely need to use more than 20% of your budget to pay the debt down as quick as possible. If you want to retire at 40, you’ll need to save way more than 20% of your budget to invest for your early retirement.

On the other hand, if you already have your retirement accounts more than fully funded and you never have to put another penny in again, maybe you can spend more than 30% on wants. Just make sure that you’re not spending more than you earn and you’re reaching all of your goals financially.

Cash Envelope Budget

If the 50/30/20 budget doesn’t meet your needs and you’re worried that a customized budget won’t work for you because you’re prone to overspending then the cash envelope budget is likely your best bet. Instead of keeping track of your finances mentally or on spreadsheets, you’ll keep track of your finances visually with cash and envelopes.

When you get your paychecks go to your bank and withdraw your money in cash, just make sure you’re not paying any check cashing fees. Next, take the money home and make an envelope for each category of your budget. Divide your cash into the appropriate envelopes.

Be extremely careful when you do this, because once you put cash in the envelopes, you shouldn’t transfer money between envelopes. When the money in an envelope is gone, then you can no longer spend any more money in that category until your next paycheck. This is a great way to dip your feet into the budgeting waters if you are have trouble controlling your spending.

Between these three budgeting methods, hopefully one works for you. Do you have a favorite way of budgeting other than the one’s I’ve listed above? If so, please share them in the comments below. I’d love to learn from you.

photo by: niXerKG

Taking Control Of Your Money Starts With One Simple Task

no money in the bank

No Money In The PIggy Bank

Have you ever had your checking account hit zero before your next paycheck hits the bank? You’re not alone. According to a recent survey by Bankrate, 76% of Americans had less than 6 months of emergency savings available.

Having six months of savings available isn’t an easy feat. You can get there with some effort and trust me, the financial security feels amazing.

Don’t know how to get there? Don’t worry, taking control of your money starts with one simple task.

Start Tracking Your Spending Today

Tracking your spending is the first step to taking control of your money. Once you have complete knowledge of your spending situation, then you can start working toward having the 6 months of emergency savings goal. You have to start with small steps before you can take big steps.

Tracking your spending can be difficult for people for many different reasons. Some don’t like what they see when they track their spending. It gives them the knowledge of knowing what they truly spend their money on, which can be shocking and down right disgusting for some people.

However, it is extremely important that you face the music, track your spending and then take a hard look at where your money goes.

Ways To Track Your Spending

Tracking your spending is a lot easier than many people think. The old fashioned way of tracking spending is a bit more time intensive, but works better for many people. To track your spending the old fashioned way, simply keep a receipt for every single purchase you make. If you don’t get a receipt, make one for yourself.

When you get home, put all of your receipts in a predetermined area. Once a week or once a month, whatever works best for you, take all of the receipts, categorize them and total up your spending.

Technology Saves The Day

If the old fashioned way sounds way too hard for you, don’t worry. Thanks to technology, tracking spending is easier than ever! In fact, there are many options you can use to track your money. The key to never needing to keep a receipt to track your money is to NEVER spend cash.

If you can’t spend cash, how can you spend money? The simple answer is to only use your debit card or credit card (but only if you pay it off in full every month) for everything. If there are any expenses you have to pay that won’t take a debit or credit card, make sure to write a check with a carbon copy and what you spent it on in the memo line so you don’t have to keep a receipt.

Once you have all of your spending on a debit or credit card you can download your transactions from your bank to many different types of software such as Quicken or Mint.com. These software packages will automatically categorize your spending for you. You might have to choose a category for some of the more obscure purchases, but this method is the least time intensive by far.

After You Track Your Spending… Now What?

Tracking your spending isn’t just a one month process. In fact, I’ve been tracking my spending since my first job and will likely continue to do so until the day I die! Having the data on what you spend your money on will provide a ton of value for you in the future.

Once you have a month or two of spending tracked and categorized, you’re ready to move onto the next step. Evaluating your goals and priorities in your life!

Do you know someone who needs some help with their money? Casually tell them that you just read this awesome post and send them over here. It might change their financial life!

Do you track your spending? If so, what system do you use and how does it work out for you?

photo by: Images_of_Money