Does Sallie Mae Have You In a Chokehold?
Assessing your Debt
The first step you need to take is to get organized and assess your debt. Most people don’t even know how much they owe!
How do you expect to get out of debt if you don't even know how much debt you're in?
You need to create a blueprint based on your specific situation, which means diving into the numbers, looking at interest rates, monthly minimums, etc. It sounds complex, but it really isn't that bad.
Along with this, you want to create achievable goals and a specific timeframe. This will give you a clear path and force you to be more disciplined on your journey.
“I will pay off my loans in 2 years,” sounds way better than “I want to get out of debt.” That little mindset shift will go a long way when it comes to this process.
Getting Organized Looks something like this:
Choose a Strategy - Debt Avalanche vs Debt Snowball
Once you figure out the numbers and create a timeframe, you can now decide on which repayment strategy you want to use. The two most popular strategies are the “Debt Avalanche” and the “Debt Snowball.”
The “Debt Avalanche” will save you the most money. The first loan you want to pay off entirely is the one with the highest interest rate. After the highest interest rate loan is paid off, you will continue this process with the remaining loans.
The Debt Avalanche Looks like this:
The Debt Snowball is a great strategy for people who need quick wins for motivation. The first loan you want to pay off is the one with the smallest TOTAL AMOUNT, then continue that same process once it is paid off.
The debt snowball looks like this:
The Debt Avalanche and Snowball are fantastic strategies, you just have to find one that works for you.
Consolidation or Refinancing are possible options.
Consolidation is a process done through the Federal Government
This combines multiple federal loans into one new larger loan, that way you’ll only have one payment at the end of the month instead of several.
Your new interest rate will be the weighted average of all the loans.
Refinancing combines your multiple loans using a private lender, that way you’ll only have one payment at the end of the month instead of several.
Your new interest rate will depend on the company you use and your creditworthiness. There are several different companies, so make sure you do your research!
Managing your Money
In order to get out of debt, you need to be better with your finances.
You need to create a budget for yourself. Having a budget is like having a diet for your money. You need to know exactly what is going in and exactly what is coming out of your pocket. Becoming more conscious of your finances will help you drastically on your path to freedom.
1. Write Down Expenses
2. Figure Out After Tax Income
3. Do the Math
4. Review Your Status and Adjust Accordingly
The 50/30/20 Rule will help you budget correctly
Your income should be delegated as follows:
50% for Needs (Rent, Mortgage, Bills, Cars, etc.)
30% for Savings/Investments (Emergency Fund, Stocks, Bonds, etc.)
20% for Wants (Shopping, Restaurants, Activities, etc.)
These budgeting categories are important to understand. The goal is to keep more money in your pocket and stop the wasteful spending.
Along with this, ask yourself what financial sacrifices you can make to improve your current situation.
Increasing your Income
Money won’t solve all your problems, but it will solve your money problems.
Penny pinching will definitely help, but it will only go so far. Simply put, you need to find a way to make more money.
Besides my main income, I had several different side hustles. These included refereeing basketball, giving out basketball lessons, and flipping. Flipping is where you find items for cheap and then sell them for a higher value. Garage sales and thrift stores are perfect places to find items to flip.
Take what you're good at and monetize those skills. If you're a great artist you could run a wine & dine class, or give out art lessons. If you're good at sports you can give out lessons to younger kids teaching them fundamentals. Everyone is good at something, so you can figure it out!
Along with this, don’t be afraid to put some work in on the weekends. If you don’t, you're missing out on 104 days (28% of the year) to put more money in your pocket.
Transform Your Life Today
Disclaimer: The information within this guide is for educational purposes. I do not guarantee that you will see the same results as me.
Your results will rely on your decisions. This guide is a tool for you to use. I will show you how to use the hammer, but I can not build the house for you.
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