Finances: Why We Are Refinancing and Leaving IBR Behind, For Good!

Before we head off to Portland, OR, we wanted to share with you guys some very exciting news! We are finally pulling the plug on student loan forgiveness, completely! We are in the process of refinancing our student loans, and leaving IBR behind, for good!

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Why haven’t we refinanced sooner, you ask? Well, there is a clause in the student loan forgiveness program IBR that states that once we refinance our loans, we will no longer be eligible for the student loan forgiveness program in the future. Meaning, if something happened, like one of us lost our jobs, we would still need to continue to make the $6,500/month payment from now until forever (or at least until we are free from the loans). If we stuck with IBR and one of us lost our jobs, we could revert back to paying the minimum payment under IBR (which is calculated as a small percentage of your income), until we could dig ourselves out of the rut. You can see why refinancing can be a tricky thing. A life event that changes our financial situation could immediately cause us to get in trouble with the IRS if we cannot maintain that $6,500/month payment. In other words, we were giant wussy pants and scared of what could happen. We were not quite ready to leave the safety of IBR when we decided to pay down our loans a year ago.

However, under the IBR program, my student loan with Great Lakes is charged an interest of a whopping 6.7%! By refinancing, we could lower that down to about 5.5%. It doesn’t seem like much, but on a loan this huge, it makes a big difference. To give readers an idea, for a 10 year refinance at 5.5%, our monthly payment would decrease from $6,500 to $5,300! Or, put another way, if we continued the course of paying $6,500/month, then we will be done with our loans in 7.5 years! I don’t know about you, but both perspectives are extremely exciting and extremely enticing.

I have spoken about us paying down $84,000 towards my student debt of $550k+ in the past year. Initially, we didn’t know at the start of our journey whether we would be able to make the large monthly payments. We wanted to try it out, but were afraid that we would not be able to support the lifestyle we want and still have enough for the loan amount. What we found was that we were able to alter our lifestyle in order to make our payments, and our lives have much improved from it. After one year, we are extremely confident that this is the path we want to take, and that we can do this! We are no longer afraid of the what-ifs and are ready to take a leap of faith (in ourselves) and just turn our backs on student loan forgiveness for good!

So what happens if some life event occurs that dramatically impacts our finances? We haven’t forgotten about the possibility of one of us losing a job, or a natural disaster happening, or a family emergency occurring, although cross our fingers, legs, toes and arms that none of these ever come to fruition. But we HAVE thought through a series of possibilities that could help us in such scenarios.

  1. Have an emergency fund. Over the past year, we have built up an emergency fund that could support us for 2.5 months if one of us loses a job, or for a little under 2 months if both of us lost our jobs. We will continue to add to this emergency fund and over time, it should be a very big safety net for us (or it could help us pay down loans faster towards the end!)
  2. Make use of the lower monthly payments. There are TWO ways we could make use of the lower monthly payments. The first is to pay the $5,300 per month minimum payment, and stash the difference ($1,200) in the emergency fund every month. Although a viable plan, that isn’t the path we are going to take. The other is to continue paying $6,500 a month since we can support that payment, and plan to be done in over 7 years. Because we would be paying extra $$ a month, we would be paid ahead. Meaning, if something were to happen, we would have accounted for future payments already, and would likely have a buffer of time before we are back to our originally determined schedule.
  3. Rely on the loan’s forbearance policy. Loan companies want to get paid. If someone really cannot make payments, then the loan’s forbearance policy will temporarily allow non-payment for a set number of months. The interest will still accrue, but it is a back-up!

Luckily for us, our jobs are very flexible and we don’t really see ourselves without work for long periods of time, but you never know what the future may hold, and sometimes life gets out of control. So, yes, it IS still wildly scary for us to be doing this! Too risky for some. But I believe in our abilities and focus and determination. And we want to inspire other people to feel like they could be freed too.

How about you? Feel like this is too crazy a venture, or would you be willing to try too?

Finance: Why I Consider the Loan Forgiveness Program as a Risky Chance

When you graduate with a loan as large as I have ($550,000 in debt!), it is easy to view student loan forgiveness programs as the superheroes of our lives. There are many different loan forgiveness options that you must choose from, but once you’ve chosen one, you are given the choice of paying a sliver of your income every month, with the promise that at the end of your program, the remaining (accruing) balance will be wiped forever from your life! It’s an ultimate quick fix to a problematic giant standing in the way of your financial independence. The small monthly payments are on autopay and the looming terror is out of sight, out of mind, for the next twenty or twenty five years. So why the skepticism?

Twenty five years is an extremely long time. I know, because I have barely passed my twenty five year mark. I also know that because after I add on twenty five years, I’d be over fifty. To be honest with you, I don’t want to keep this lifestyle up until I’m fifty. A lot can happen in twenty five years. The immediate assumption is that no matter what happens in the future, we will be grand-fathered in this loan forgiveness program.  But although it’s an immediate assumption, it doesn’t mean it’s logical or true. Because nowhere in the fine print does it say that. But our brains are wired to make up stuff that will put us at ease. And so, some like to reason that this must be true, and I know I can’t convince them otherwise. Because, what do I know?

Well, here is what I know.

  • I know that there are people out there who chose a ten year loan forgiveness program. Only to be told after their ten years that they do not or no longer qualify. Some haughty know-it-all will likely say, “Well, that’s THEIR fault for not knowing their own program!” But as we all know, they don’t make programs easy to know. The fine print just keeps getting smaller AND longer.
  • I know that my sister took a five year contract with a charter school in a city far away from her family and friends with the promise of getting $40,000 forgiven from her student debt after the five years. However, you cannot apply for the forgiveness until you’ve completed all five years. Last year, the amount forgiven changed. It went down to $17,000. Still a good amount, but not the promised $40,000. Her five years ends in June. So in June, she would have given up five years of her life living in this far away city to only get back less than half of what she thought she was going to get back. Which is depressing to think about, since she turned down multiple amazing opportunities with higher pay for this program.
  • I know that in the ONE year that I have been out of dental school, there has already been talk of the loan forgiveness program being extended to THIRTY years. An additional five years of minimum payments, a continually accruing debt, and a higher percentage of your loan that you have to pay in taxes at the end of it all. More, more, more.

Therefore, you are right in saying that I just don’t know. I don’t know the future one year from now, so I sure as heck don’t know the future twenty five years from now. I don’t know who will be in the government, who will be controlling our laws, how the program will change, if the program will still apply to me, and if the program will even exist. And with a loan this large, I will not leave this up to chance.

What I do know is that I CAN tackle this giant, so I WILL. I will not let him rule over me, stop me in my path, instill any fears or doubts.

Will you tackle him, too?

 

Finance: Why We Chose Standard Repayment Over Loan Forgiveness

We started our loan repayment journey under the IBR program, as advised by so many professionals. But I always knew in my heart that this was not the best path for me. Apart from the fact that IBR resulted in more money paid towards my loans overall, there was the issue of it extending twenty five years into our distant future. I am one who values freedom above many other things. When I was young, I hated when people told me to do things that did not line up with my values. My most hated explanations were “Just because” or “Because I said so”. Talk about lack of motivation. I despised myself when I was forced to do something, because authoritative figures claimed to have the upper hand. I remember thinking to myself, when I get older, I will have control over my own life. Today, I have that same fire feeding a resolve in me to stay free, from things financial or otherwise. I want freedom to do certain types of work. I want freedom from a tight work schedule. I want autonomy in my decisions. I want the freedom to travel whenever I want to. I want to have free time. All of this also requires to be financially free. Having graduated dental school at 26 years old, the IBR program would mean that we would have this burden hanging over our heads until we were past 50 years old. Psychologically, the burden was too much to bear. It was the psychology of the thing that really pushed me towards frugality, financial independence, and hopefully in the near(er) future, freedom.

When I graduated dental school and I finally started working, Mike and I were facing numerous large payments related to moving in together, creating a home for ourselves, getting married, and going on a honeymoon. And while I would not take back any of the decisions we made, we weren’t exactly saving much at the time. The great part is, we weren’t going into debt either. Whereas some people may take out loans for things such as weddings and honeymoons and moving, we definitely stayed within our means and I am proud of that fact.

But once the dust settled and we found peace in our space and identified our roles in everyday life, we stopped having something to spend money on, and we started to see that we were not bad savers after all. In fact, we were saving at such a quick pace, that we would have saved up for a down payment for a house in two months’ time! We started to talk about buying a home for ourselves, when our financial planner asked us a simple question. Do you realize that at this rate, you can pay down your student debt the standard way in less than ten years?

At first, I was aghast. I had spent months trying to convince USC financial advisers, and Mike, and even my financial planner, that there had to be a way to do this. Mike deemed my conclusions as too optimistic, and slightly delusional. He always said, the numbers just don’t work. But in my head, they did work. The numbers don’t lie.

I then went on to bombard our CFP with a million questions. Excited, I could not wait to tell Mike when he got home that night. I remember being so stoked. Initially, he did not believe me. It wasn’t until our financial planner created a spreadsheet that demonstrated our capability to conquer the loan in 9 years, that Mike started to change his view. We were going to be free from these chains fifteen years earlier than we thought!

But with it comes a cost. We will have to give up buying a house, for now. We have to continue a fairly frugal lifestyle, and have concrete intentionality with our money. We have to be able to psychologically see a majority of our paycheck going towards paying down the loans every month. We have to give up the social status symbols that our friends will be collecting under their belts. In exchange, we will have fifteen additional years of freedom. What say you?

I say Hell Yeah! Mike and I are simple people anyway, as can be seen in the rate at which we were saving. We could rationalize not buying a house, not buying a new car, and not getting the latest gadgets. I could not rationalize being tied down by my career choice until I’m past fifty. We decided that yes, we will choose standard repayment over loan forgiveness!

One caveat. We are still enlisted under the IBR program. Why? Under the standard repayment plan, we have to make minimum payments of $6500/month to be able to pay the debt in 9 years. Under IBR, the payments are closer to $400/month. If one of us loses a job, $6500/month is impossible on only one of our incomes. Especially so if I was the one to lose a job. Switching a hundred percent to standard repayment will make us vulnerable to the whims of whatever life may throw at us. The failure of Mike’s start-up company, the selling of the practice I work at, if we decide to have children, disability for either one of us, these are all things that can greatly impact our finances and if we commit to a standard repayment, it can heavily mess with our ability to pay the loans. And trust me, you do not want to default on student loans. However, under IBR, we are able to pay more than the $400/month without penalty, so we stick with IBR in case of a future emergency, but continue to make the larger payments.

Unfortunately, this does not allow us to refinance our loans. Once the loans are refinanced, we become ineligible for IBR. So although the IBR interest rate is a whopping 6.7%, our financial planner convinced us that the IBR buffer for not-so-awesome life moments is well worth the extra interest rate. Once the loans get paid down to a more manageable sum, then we can refinance, since a smaller loan will be much more manageable.

So therein lies our decision tree, our little story.

Finance: Tackle Undergrad Loans During A Gap Year (ASAP)

There are a few financial decisions that I made in my early twenties that I am very proud of, and a few that I am not so proud of. For decisions that fall in the latter category, I sincerely wish that someone could just create a time machine so that I could send myself back to my younger self and shake some common sense into her. Or at least allow me to go back in time and have a one-on-one discussion (likely at a cafe somewhere) regarding my retrospectively realized financial mistakes, with the hopes of guiding her towards the right direction. But alas, there is no time machine.

However, knowledge lost to me should not be lost to others. I am fortunate enough to have a little brother, six years younger, who recently shocked everyone we knew by deciding to switch from pursuing a path to physical therapy to becoming a dentist such as myself. At first, I told him not to do it, mostly out of fear that he was entering the profession for the wrong reasons. It’s not exactly the profession for everyone. You have to love being inside people’s mouths, and I sincerely believe that description fits a very small group of people. And in exchange for this privilege of being surrounded by teeth, there is a costly price, which includes not only dedicated time towards earning the degree, but a huge monetary cost as well. I could see a young man entering the profession thinking it’s all fun and games. You can call your own hours, you get a decent pay. But you lose a lot of hours compared to your peers, studying the craft and paying off the debt. Additionally, you don’t see a majority (in my case, any) of your pay if you are dedicated to paying off the loans by the time your 38 years old. And by the time you are free from the debt, your peers would have had a 17 year head start on building their lives over you. I was simply afraid he would become a tooth doctor and then regret the bondage and the responsibility that comes with that. The worst you can do is choose to spend your days doing something you don’t absolutely love.

After a lot of back-and-forth conversations about the whys and the whats and the hows, I could see this is what he decided he wanted to do. And in my family, once we made up our mind about something, there is no change of course. Despite my resistance to the whole thing, I could tell he was going to push through with it, whether I supported him or not. So I did what any big sis would do. I immediately switched to supportive mode, figuring that if he is going to do this thing, then I’m going to give all I’ve got to making sure he loves every moment of it. So now we work together at the same office, me guiding him towards becoming a better dental assistant everyday, and him helpfully suctioning saliva out of my patient’s mouths. Perfect harmony.

I started writing the finance part of my blog to help newly graduated dental students with a massive debt realize that they are not alone, and that there are ways to overcome that debt. Now, I have an even bigger responsibility to walk my little brother, and other newly graduated undergrads towards a path that would minimize that final number, as much as humanly possible. If I can’t send myself back in a time machine to save myself from all the silly mistakes, I can at least try to save my brother. I am not doing this so that he could be rich one day. Such is never my goal. I am writing this so he can be a free man.

So if I could travel back and tell my recently graduated undergrad self what to do while waiting to get into grad school, I would tell them one thing. Use your hard-earned money towards paying down your undergrad loans. This was a very feasible thing for me, since I graduated undergrad in 3.25 years and I had an extra 9 months of freedom between graduation and grad school. It was a year and eight months before I was to start my dental program. During that time, I was living at home, and working three jobs. The first was a job as a dental assistant, averaging thirty hours a week. . The second was a visuals specialist at Banana Republic, averaging ten hours a week. And the last was a tutoring gig in Newport Beach, averaging an additional 10 hours a week. All jobs paid me over minimum wage, which at the time was around $8.5 an hour. The dental assisting and the tutoring paid me $13/hr. The sales job paid me above $9/hr. I wasn’t paying for food or rent, with much gratitude towards my parents. But I was also not paying my student loans down. So where did the money go?

At that age, you work like I did and think to yourself, “I’m rolling in the dough.” I had no concept of the power of money at that time, for I had no one to show me, or to even talk to me about it. Friends were dining out every night, going to concerts and raves, watching movies, and buying everything they ever wanted. What did you think I did?There was no outward consideration towards my far off future. I couldn’t see that these loans would one day become shackles that slow me down from enjoying later joys. There was this concept being fed to young kids, summarized in four capital letters. YOLO.

I was twenty one years old, and I thought I was unstoppable. I had so much energy, I worked like a horse. I never realized that the pace was unsustainable and that I will not want to work like a horse for the rest of my life. And off course, once I clocked out, I went on partying like an animal. (Okay, not animal. I saw REAL animals in college, and animal I was not. Maybe a tame deer. Either way…) I  blew my money on frivolities, living my life under the following motto: “Work hard, party hard.” WHO COMES UP WITH THESE THINGS?!

I  wasn’t fully irresponsible (or so I thought) since I paid the minimum payments towards my loans every month. They told me paying the minimum payments is considered good. No one ever told me paying off the maximum you can possibly pay is ideal. I never even hit my principle balance. I was paying so little that my accrued interest stayed about the same. At the time, I was already dating my future husband, and he was also working hard to pay for his housing. Since I didn’t pay for rent, I thought I had wayyyyy more money than him, and offered to take him out to eat whenever I felt like it. I bought him many gifts, just because. I invited him to concerts and bowling and karaoke and anything I can throw my money at. What I didn’t realize was that he had almost zero debt. He took out a skimpy little loan, which was paid off a few months after he started work as an engineer. And there I was, almost two years graduated, with the same debt I had while I was in school.

I was even so foolish as to plan a trip to Hawaii with Mike. In preparation for this trip, and as a reward for working so hard on my year and a half off, I quit all three jobs pre-emptively at the end of May, three months before dental school was to start. I continued my usual spending, and then allocated a huge chunk of my hard-earned money towards Hawaii. Granted, that trip was our first trip together and ended up being our favorite trip until we went to New Zealand. So yes, YOLO. You never get the time back, and it was a great experience. But the trip cost something close to $5,000. At the time, my student loan was about $16,000. I spent a third of my debt on a vacation, without realizing that it’s all just borrowed money. The crazy part was that I had $5,000 in my bank account, (I actually had close to $10,000 in my bank account) ready to be used for Hawaii. That money should have been placed directly into student loans the minute I was earning it. Not knowing anything at all about the power of compounded interest, that could have saved me a good portion of my current loan amount, probably around $13,000 or so, since it accrued interest over the next 5 years that I was in dental school. That’s the thing about any loan with interest. It continues to add even more debt to your plate, and the longer you wait, the more money you waste. As a young twenty something, time is on your side. Address debt while you are still young.

Now, you may be saying, $13,000 out of $550,000 is not a big difference. It’s such a small sliver of the pie! But it is, because it all adds up. It’s not like you graduate and start paying back the principle on your loans right away. You address the interest that has been growing on it first. For the first five months, we didn’t even touch our principle. Five months of all of the paychecks of a dentist going towards a loan, and not bringing down principle can be a very depressing thing. I think people need to see that. Extrapolate that for 9-10 years, as if you are essentially working for no take home pay for ten years, and then tell me that the $13,000 does not matter. Every single penny matters. That should be the mind set newly graduated undergrads should have. That every financial decision they make will shape their future. Especially so if they are going to pursue further education. It’s not a matter of “YOLO, my future self can worry about that.” Your future self is still you.

If I could do it all over again, I would continue to live at my parents, like I was doing. That was definitely a decision I was proud of. I would put as much of my income as possible (which would have probably been 90% of it) towards paying down my undergrad loans prior to grad school. I would have worked harder while I had a lot of energy. I would have saved more by saying no to all the pressures to conform to this image of a successful, newly  graduated student. I would have worked until the very end of my “time off”. I would have probably skipped the Hawaii trip, or traded it in for a more financially friendly local trip to a national park. If I had done all of this, I would have been able to pay off all of my undergrad loans easily, while still living a fairly decent lifestyle, and possibly saving money along the way for my future graduate loans. Heck, I might have even been able to go to Hawaii and do that. Don’t believe me? Here’s the math.

Dental assisting: $13/hr x 30 hrs/week x 78 weeks = $30,420

Banana Republic: $9/hr x 10 hrs/week x 78 weeks = $7,020

Tutoring: $13/hr x 10 hrs/week x 78 weeks = $10,140

Total income: $47,580

Student Loans Total when I started dental school = approximately $16,000

Conclusion: I didn’t know anything about money at the age of twenty one.

Currently, my brother is gallivanting around Costa Rican terrain with a college friend. Before he left, I went over finances with him, grilling him on what he was planning to do while there, how much he was planning to spend, and pointing out tips to save money while traveling. The bottom line is that I can’t stop him from enjoying his life. I’m not even saying his trip is a life mistake. The Hawaii trip was a financial mistake, but it was also an experience that led us to realize how important traveling was to us. Ironically, the debt limits the extent with which we can travel. You win some, you lose some. He will likely learn something very valuable about himself on his travels. But I want him to at least hear from somebody that this decision will affect his future from a financial standpoint. I think every newly graduated kid deserves to hear that. If I could talk to my twenty year old self, I can’t guarantee she would have listened, or even fully understood. I mean, I would continue to make this mistake throughout all of dental school, again and again. But there is a chance that she would have changed her course, ever so slightly. And that makes a difference.

 

The First 5 Steps to Getting Our Finances in Order

Right after I graduated from dental school, I knew I wanted to get our finances in order. We were six months away from swearing eternity to each other, and I wanted to be clear about what our current financial status was and where we want to go from there. They say that finances are one of the biggest stressors in a relationship, and I knew I wanted to nip that one in the bud and move on to living happy eternal lives.

There were a few key steps that, on paper, seem super elementary, but I guarantee that the majority of the people do not have these five steps down. I am not saying these are the first five steps everyone should take, but they were the first that we took and it worked out really well for us! If you are looking to get your finances in order but aren’t sure where to start, hopefully one (or all!) of these will give you the boost you were looking for.

  1. Build up an emergency fund, and then never touching that money unless it’s a TRUE emergency. For my entire life, I knew in the back of my mind that I needed an emergency fund, but never have I had one. I assumed that there will be some money left in the bank in the case of a true emergency that I could rely on until the emergency is solved. Off course, I was underestimating the cost of my potential emergency. I assumed an emergency constitutes of a flat tire, or the need to buy something right away (this was before I became anti-consumption and was practically throwing my money out the window). In light of the recent fires in Ventura County, it is safe to say that a TRUE emergency can constitute of a fire affecting your city, so that your home burns down, along with the office that you work at, thus putting you out of a home, without belongings, and without a job. Recovery from such an emergency could take multiple months. Or an accident that could leave you with hospital bills and a disability that prevents you from going back to work. When put in that light, I never thought a true emergency could happen to me. Well, it can happen to me. Most certainly, it can happen to anybody. So one of the first things we did was build up our emergency fund. Our emergency fund is enough to last us through three months’ worth of living expenses. It sounds easy to do, but in order to find the correct number, you actually have to track your monthly living expenses. There is a tendency to underestimate the correct figure. Saying yes to dining out with friends and purchasing random items during a Target run can quickly increase that number significantly. So we started to track our finances (See item #2 below). Once we got our number, we saved up enough and then did not touch that money. It still sits in our bank accounts today, which is a great thing because that means we have been emergency free for the past year and a half! I’m not talking, “I am out of money in my bank account, let me just borrow from my emergency money.” Ideally, you don’t ever want to get to the point where you run out of money in your bank account, but we will get to that later.
  2. Track your money by budgeting. We started to track our finances with the budgeting tool called YNAB. You can use any budgeting tool alternative, such as Mint.com, or your own homemade spreadsheet. We decided to go with YNAB only because it was what our financial planner set up for us. I fell in love with budgeting! I was always interested in numbers, organizing, and planning, so this was just my cup of tea, luckily for Mike. The tool tracks money going in and money going out. By linking your bank accounts, the tracking is almost immediate. The only part you have to do is categorize your spending and income, so that you can see how much you spend on things such as rent, groceries, gas, dining out, and any other category you can think of. You can be as specific or as vague as you want. I prefer to be vague so that it makes the process a little bit easier. I was amazed at how much money we were hemorrhaging through, and that’s quite a realization since, compared to a majority of our friends, we were pretty frugal. This was the part of the process that pushed me towards minimalism and anti-consumerism. Thinking about my past habits with spending money is almost nauseating. To multiple that by the number of Americans who do the same or worse makes me want to cry and beg Mother Earth for forgiveness. To this day, we continue tracking our spending. It’s taken the guesswork out of finances, and we no longer have to think about whether we have money or not for a certain something. We always have the money, because it is already allocated for. We follow the simple envelope system, which long ago would consist of one taking their income and placing them into different envelopes based on spending categories. There would be an envelope for utilities and for auto-registration, etc. In order to pay for something, one would take the money out of the appropriate envelope. If a person tries to overspend on dining out, they can’t, because there are no physical dollar bills left in the dining out envelope. It would require for them to physically take money out of a different envelope to cover their spending, or force them not to dine out for that day. That’s the simplified version of the envelope system and it’s the categorization system that YNAB uses. Because of this, once we get our paychecks, every single dollar bill is allocated for a future expense. So that when the expense comes, the money is already there. What about in the cases of unexpected expenses? Well, that would be called an emergency, and that’s also already saved and built up from step 1. And no, there is no such thing as a shopping emergency. There is no such thing as an unexpected expense unless some drastic unforeseen natural disaster strikes in your neighborhood. The whole point of the budgeting process is to teach us that there is not one thing that we absolutely need, and those that we want, we have the time to plan ahead for and save up.
  3. Put everything on Auto Pay. Life gets hectic and busy, and sometimes we miss a payment and get charged a late fee. Ugh, those late fees kill me. It’s another way of throwing money straight down the drain. Stop that right now and put your worries to rest. Take the minimum payment for every credit card, utility bill and loan and place it on auto pay at a particular time of the month, every month. Just make sure it draws after your paycheck is deposited in your account, at a time when you know the money will be present in the bank account. The last thing you want is an overdraft fee.
  4. Start paying off your debts one by one. Since I opened my first credit card at age sixteen, I have never been debt free. The first thing I wanted to do was start our debt snowball. Credit card interest rates are insanely high, and it was crazy to think that I was throwing away so much of my money at the same time that I was spending money I did not have. So we tackled our credit cards one by one until we brought them down to zero. After we cleared all our credit cards, we kept them clear every month by paying off the total. By doing this, we were also reaffirming that we were spending well below our means. After all our credit card debt was paid off, we only had two debts left. My student loan, and Mike’s car loan. We decided to tackle the student loan first. The reason was because it had a much higher interest rate than the car loan, as well as a higher amount. The amount of money we would be gaining in interest by letting my student loan sit is way more than the amount of interest we would gain by letting the car loan sit a little longer. Don’t get us wrong, we are still paying down the car loan at the same time, at a speed fast enough so that it will be gone in three years. But we are funneling all our extra money towards paying down the student loans instead. Once you start paying things off, it becomes more addicting than spending your money. I get such a thrilling, spine-tingling joy when I pay off debt. The debt snowball is well on its way, and my goal is to make this snowball the biggest and fastest snowball possible!
  5. Hire  a financial planner. It’s the last on the list, but it was actually the first thing we did. It was how we began this journey. So why is it listed as number 5? I hesitate to put this on here because some people believe that hiring a financial planner is not a worthy way to spend money. Some may argue that paying for such a service could cause you to lose out on money that would be better served invested or paying down debt. I am not completely disagreeing by the way. If you are really good at this type of stuff and can do an equally great job on your own, I would back up your decision not to hire a financial planner. I would agree that your money is way better spent towards investing or achieving your dreams. So it isn’t for some people, which is why I hesitate to put it as number one, for fear that somebody will just shut down this post’s tab and move on with their lives. For us, this was the right choice, and I think it IS worth the money. One hundred percent! First off, notice that I did not write financial investor. That is a different type of service, one that focuses solely on investing money. A financial planner, when you’ve got the right one, does more than investment management, although that is part of their job description as well. A good planner will start by helping you discover your goals, and then trying to get you to your goals by tackling your financial life. It isn’t about the money, but about the end result. Where you want to be, and how you can shape your finances to get you there. Ours is particularly good at analyzing what we truly want and asking us the right questions to re-evaluate every few months if our dreams are still our dreams. We create the vision, and he helps to give us the path to make that a reality. The planner will keep you accountable, and is useful as a resource to guide you towards new and innovative ways to approach your goals. People can say it’s a mistake, we don’t care. Let’s just say, it’s a mistake we have to make. And if we had to choose all over again, we would do it just the same because frankly, I wouldn’t even be here, writing about all of this, if we had chosen differently.

So those are our first five steps, and now you know that the list is not in a particular order. Happy budgeting!