My after tax income for 2014 was $15,253. In the last three months of this year I was able to pay off two student loans, totaling $3,746. How was I able to do that and can I keep it up?
I wring every last benefit I can out of my jobs. Since none of my jobs offer me actual benefits, I take what I can, where I can. It’s important to work hard but it’s also important to work smart. Once I started doing the things below, it really added up to some extra loan dollars!
For example:
I cater 1-2x a week- It is a guarantee that there is extra food at each event we cater. Does health code dictate that that food must be thrown out? Yes. Do we follow that rule at all? Nope!
Each week I fill my tupperware containers with everything from tilapia to beef to mashed potatoes to apples. I have taken home whole logs of goat cheese, salmon fillets, bags of red grapes, beef tenderloin and bags of spinach. I eat primarily off of these leftovers until my next event. Even though I personally don’t eat red meat or pork, I always bring home these items because I have three housemates and a boyfriend who will eat anything and everything.
By taking home this food that would otherwise be thrown out, I save myself around $50-$80 each month. Not only do I earn an hourly wage at catering jobs but I save myself even more money by scoring that free food.
I walk to meetings- One of my part-time jobs is with a new nonprofit in town. It doesn’t have a business address yet so we’re all working from home. This saves me gas money each month and wear and tear on my car. My boss and I meet once a week to discuss how work is going. I specifically requested we meet at a coffee shop a 15 minute walk from my house. I can get in some exercise and save on gas money by walking each week.
I signed myself up for auto-debit- Signing myself up for auto-debt on my loans saved me .25% on my interest rate. Now for however long I have my loans (please only 14 more months!) I am paying less in interest in each month.
I make bi-weekly payments- Paying bi-weekly is the easiest and smartest action I have ever taken on my loans. See, the longer you go between loan payments the more interest you’re accumulating. So when you do go to make that payment 1x a month, not all of it is going to reduce your balance. Some of it is paying off the interest (read: added money) on your loans. Paying bi-weekly on your loans means there is less time for interest to accrue, so the payments you make have a bigger effect on lowering your balance. Interest on student loans accrues DAILY, never forget that!
To give you a clear example, let’s use my loans: I currently have three different loans through Navient (formerly Sallie Mae) and one through my alma mater. Let’s just use the Navient ones for now. One is at 5.75% interest, one at 4.75% and one at 4.35%. (Those strange %’s are coming from my .25% reduction due to auto debit).
I pay the minimum payment on the 10th of each month- $167.29. Then, two weeks later I make another payment. This second payment varies in amount depending on how much I was able to cut from other areas of my life. But, if I haven’t driven all week, if I’ve eaten food I took home catering all week and I didn’t go out at night, I can save a decent amount. So I usually make a payment of $500+ dollars in that second payment. The amount of interest that has accrued is usually in the $1-3 dollar range, rather than the $30-40 dollar range if I waited until the next month. So most of that extra $500 is going straight to paying off the balance and lowering my overall debt.
Now, I made pretty spectacular headway these last couple months because I took $1,500 out of my savings and paid off a loan in one fell swoop. I did this because that loan was only $1,500, I had enough money in my savings and my interest rate was at 6.8%. It would have cost me more to pay that off slowly, even on the bi-weekly payment schedule. So I took the plunge and did it! I was working 5 jobs at the time and was able to replenish my savings account in just one and a half months.
So what’s done is done on my loans and I’m pretty proud of it. But can I keep it up going into 2015? Probably not. I have several new expenses and no new income headed my way next year. But I’m glad I’ve been able to do so much thus far because it just makes the road ahead that much easier. =)
Kara Perez is the original founder of From Frugal To Free. She is a money expert, speaker and founder of Bravely Go, a feminist financial education company. Her work has been featured on NPR, Business Insider, Forbes, and Elite Daily.