It has been a while since I posted a story in the Debt Diaries, so I want to thank Dee, from Color Me Frugal. Read on about how their attitude toward debt is changing!
The hubs and I graduated from school at around the same time, in 2006. We’d been broke as a joke for years in school, like most people. I recall a conversation we had shortly after getting our first paychecks. We were in awe of how much money we were making (which wasn’t a lot- especially considering the long hours we were working- but it was much better than what we’d been making while in school, which was nil). I can’t remember who said what, but the gist was something like, whoa, we’d better get good at managing our money. If we waste money from here on out, we’re going to be wasting a LOT of money!
Thus began our journey into investing. We happened to have pretty decent timing, since the market dropped dramatically within a few months of our entry into the world of investing; we were able to put nice amounts into our Roth IRAs and our 401(k) s during the Great Recession. So we got to pick up many shares of our chosen investments ‘on the cheap’ you could say. And in the years since then, the market has gone up quite a bit, so we have enjoyed some nice increases in the value of those accounts.
But one thing we’ve neglected somewhat over the years is our debt payoff. Unfortunately neither of our parents own a money tree, so we had to take out student loans to complete our degrees. And we made some fairly stupid mistakes while in school, such as indulging expensive whims (like a trip to Mexico) courtesy of our student loans. We graduated with combined student loan debt in the six figures. Wait, you’re wondering, if you graduated in 2006 aren’t your loans close to being paid off? No, because somewhere along the way we consolidated and refinanced them- we actually got killer rates of 2.5% and 3.5%. But we also somehow managed to get the repayment period extended to 25 years.
Here’s the scariest part- I actually don’t recall having any conversation at all about how long the repayment period would be. I don’t recall asking about it or considering it. I do recall hearing the low interest rate I would get on my consolidated loan, which I was told was among the lowest rates in history.
Unfortunately this turned out to be a good thing and a bad thing; it’s great to have such a nice interest rate, and the extended repayment period I’m sure makes our monthly payments lower. But in the last seven and a half years we have not made much progress in getting that debt paid down, since such a big chunk of the monthly payment goes toward interest.
Because of the low interest rates we pay on our student loans, for much of the time over the last few years we have been really complacent about them. We have rationalized that we’re better off investing since we could probably make better returns by putting more in our retirement accounts or saving up for a rental property. This may be true, and we don’t regret the fact that we have done a lot of investing over the last few years. But in recent weeks and months we have come to realize something.
Our student loan debt bothers us. We don’t like it.
This fact actually dawned on me several weeks ago when I wrote an article about our desire for me to be a stay-at-home mother after we adopt. My only hesitation about potentially becoming a stay-at-home mom is the fact that I have student loan debt- and if I stop working, we still have to pay it off.
What a revelation! Can you believe it took me that long to realize that I don’t like my student loan debt? I guess I’ve been drinking the “we’re better off investing” Kool-aid for a little too long. Hubby and I talked about it, thought about it, talked some more, and finally came up with a plan.
Let’s pay it off!
Unfortunately it’s not that easy, since, like our parents, we don’t have a money tree in our backyard either. But the hubs and I sat down together and came up with a plan. We’ve created a plan that will tentatively get our student loan debt paid off within two years. That’s right, TWO YEARS! Screw this quarter of a century crap that we are currently signed up for. Now, the huge caveat here is that we are trying to adopt and our plan is that I will become a stay-at-home mom (and blogger chick extraordinaire!) when we do that. Adoption is expensive. Raising a child is also expensive. So there are most definitely a few things on the horizon that may extend the two years somewhat. But the main point here is that we’ve seen the light, we’ve decided that 25 year payment plans are crazy, and we are now working on getting our student loan debt gone ASAP. We have altered our thoughts on debt and are excited to now be on the road to debt freedom!
Have you had any “aha” moments that have dramatically changed your attitude on debt? If so, how did it change things for you and your finances?
Author Bio: Dee is a personal finance enthusiast and blogger who is working hard to live a frugal lifestyle, ditch debt, and create multiple streams of income. She hopes to inspire others to achieve their financial goals by doing the same and writes about the journey on her blog, Color Me Frugal. Follow her on twitter @ColorMeFrugal, Like Color Me Frugal on Facebook, and be sure to check out her blog over at www.color-me-frugal.com.
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