My journey from massive student loan debt to debt-freedom wasn’t easy. I certainly made a lot of mistakes. Read below so you can avoid making the same ones!
Before you start reading about all the mistakes I made while paying off debt, I want you to know that I cherish these mistakes. And you should cherish all your mistakes too.
These “my bad” moments have brought us to where we are today – we are smarter because we’ve done stupid things, acknowledged them, and learned from them.
If you’ve read my student loan story, you know that it took me 7.5 years to pay off $125,000 of debt. While that’s a ton of debt, I don’t think it should have taken me that long to pay it off.
I made so many mistakes throughout my debt-payoff journey and I want to share them with you. Hopefully you can learn from my mistakes and chisel off a few months (or even years) from your debt freedom date!
1. I only paid the minimum on my debt
It honestly never even occurred to me to pay more than the bill that came in the mail.
I pay my entire dinner bill, my entire credit card bill, my entire utility bill…of course I don’t pay extra on these bills. Why would I pay extra on my student loan bill?
I quickly realized that I’d be 40 and still paying off my student loans if I only paid the minimum.
Pay as much as you can on your debt. Pay off more than you think you can on your debt. Your future self will thank you.
2. I didn’t have a plan (or method) to pay off the debt
My innocent (er, ignorant?) 22-year old self had no idea that there were different ways to pay off debt. I didn’t realize you could have a financial plan that helps you manage your debt. I thought financial plans were only for those with money who were trying to invest and save for retirement.
I’m so thankful I discovered Dave Ramsey and learned about the Debt Snowball Method. Paying off each debt, one by one, starting with the debt with the smallest balance helped me become debt free years before the loan companies said I would be.
Do your homework and find out the different ways you can pay off your debt. Pick a plan that works for you and stick to it!
Side note: I highly suggest using the Debt Snowball Method. After years of having no plan to pay off my debt, I learned about this method from Dave Ramsey and it is the #1 reason why I am now debt free. Because I want others to experience this awesome feeling, I created some free printables to help you with your Debt Snowball. Just sign up below to download them (you’ll get three downloads over the course of three days)!
3. I didn’t have a ‘why’; I didn’t have an end goal
Sureeeee….be debt free?…why not? Of course I’d ditch my student loans in a heartbeat!
I knew I wanted to be debt-free, but I didn’t have a real reason why for a long time. At some point during my journey, I sat down and really thought about where I’d like to be in 5 years, 10 years, 15 years.
I thought about the type of person I wanted to be, what I wanted to do, who I wanted to be around, and how I could make that all happen.
I pictured getting married, having kids, starting a business, being able to travel…so many things. I pictured what I wanted a typical day to be like. It became very clear to me that to make my dreams come true, I’d have to first become debt free.
After I visualized my future, I was on the fast track to debt freedom. Each time I wanted to skip the budget, spend money on unnecessary things, or do something silly with money, I’d picture my dream life and remember that I had to be debt-free to achieve it.
Picture your future – day dream and write down your goals. Is debt in that picture? Think about this dream life every day and remember that every dollar of debt you pay down brings you closer to your dream.
4. I budgeted…but on an irregular basis
I call this yo-yo budgeting – it’s just like yo-yo dieting (check out how budgets and diets are eerily similar here).
Some months, I was hardcore – I’d budget every category and record every dollar I spent in my spending log. After a few months, I’d get bored and become a little more relaxed with my budgeting and spending.
This wasn’t good. Finally, I found a system that worked for me (a physical spending log and an excel budget spreadsheet). I enjoyed using these budgeting tools, which meant I stuck to budgeting every month.
Find a budgeting system that works for you (it may require some trial and error), and stick with it each and every month.
5. When I messed up my budget, even just for a day, I’d give up budgeting for the month
Even though I found a system that worked for me, it wasn’t a perfect system. Sometimes, if I had an unexpected big purchase (needed new tires for my car, broke my phone and needed a replacement), I’d just give up on the budget for the month. So, not only would my budget be shot because of the unexpected expense, but I was also spending more on food, clothes, entertainment, etc! Not very smart.
Tell yourself it is okay to mess up. Everyone makes mistakes. Pick yourself up and continue to be strict with your budget. Find ways to stay motivated while paying off debt.
6. I wasn’t a do-er
I listened to Dave Ramsey for years (yes, years!) before I finally started his plan. Oh, such wasted time. I wish I could go back.
If you are reading this article, clearly you want to get out of debt and improve your finances. You need to start today!
Make today Day 1. Not tomorrow, not the day after, not next month. Your journey to debt freedom starts today!
7. I didn’t understand my debt
Debt can be complicated. If you have lots of debt, it can just be plain confusing.
I didn’t realize that my ten different debts all had different loan terms. They were from three different loan companies. They had different interest rates. Some had to be paid back in 10 years while others were 15 year loans. Some were federal student loans, some private student loans. A few of my debts’ interest rates went up 2% after 4 years of paying them back (<– yup, apparently that’s a thing). What a mess!
I also had no idea how student loan interest was calculated and that caused a lot of panic and confusion when each month a different amount of money was going to interest and to principal.
When starting my debt snowball, I finally sat down and understood all the terms of my loans. It took some time to research, but I’m glad I did because that gave me the push I needed to pay them off ASAP.
Find out everything you can about your loans. Learn the details of your loans and how your payments are calculated. Find out how much money you throw away to interest each day.
8. I didn’t know that my company would pay for some of my loans
It wasn’t until my fifth year of working that I discovered my company has a program that will help you pay off up to $6,000 of your student loans. One of my co-workers offhandedly mentioned this in a conversation. Free money? Yes please! Oh, why didn’t I find out about this sooner?!
Ask your co-workers or boss if there is a program to help you pay off your student loan debt. There is no harm in asking!
9. I didn’t put extra money towards debt
I’d typically get some type of pay raise (or bonus) each year.
In the first few years of paying off my debt (before I had a plan in place), I’d spend this money when it showed up in my bank account. I’d say to myself, “I worked hard all year for this bonus, I deserve it, I should treat myself”. Ahhh…regrets…
Whether it’s a pay raise or a bonus, every extra penny that you get should go towards your debt. Avoid lifestyle inflation at all costs! It’s really hard to dial your lifestyle back, so avoid increasing it in the first place (don’t upgrade your apartment, start going on nicer vacations, buying more expensive clothes, etc).
Put every extra penny towards your debt. Never “keep” a pay raise or a bonus. It’s not your money, it’s your debt’s money.
10. I didn’t hustle to bring in more money
I had a good job, and a pretty good salary. I was very happy with all things work-related and certainly didn’t want to change jobs. But what I didn’t realize is that I only worked 40 hours a week. I had so much extra time to find a side-gig to bring in some extra money. Even just $100/month would have helped me get out of debt faster.
Find ways to bring in some extra money. Put that money towards your debt. Every penny counts.
Mistakes can be a good thing
Your mistakes have made you who you are today.
While some of my debt payoff mistakes make me cringe, I know that I wouldn’t be this passionate about helping others if I hadn’t made these mistakes. I wouldn’t be empathetic and able to relate to others who are drowning in debt if I wasn’t there myself.
Each mistake I’ve made has turned into a lesson I will carry with me for the rest of my life. It’s okay to make mistakes as long as your learn from them.
Paying off debt isn’t going to be easy. You’re going to make mistakes. You’ll stumble a little. But dam, it’ll be worth it.
Have you made any cringe-worthy mistakes while paying off debt? Please share them in the comments below so we can all learn from them!