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5 Steps To Attack Your Student Loans

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Here are 5 quick and painless ways to cut your expenses and attack your student loans. These methods have personally helped me to attack my student loan debt and greatly reduce my lifetime interest.

This is a guest post from Syed from The Broke Professional! He runs an up and coming personal finance site for working professionals. Thanks for the article, Syed!

I’m an optometrist. Like many jobs in medicine, it has a strong starting income and potential, especially if you become a successful business owner. As much as I love my job, there is one thing I hated about the process of becoming an eye doctor: student loan debt.

We graduated with a lot of it – about $150,000 in total. Worse? I have colleagues who were in over $200,000 in debt. The story is similar for graduates of medical, dental, pharmacy, and law schools. According to a report by the American Association of Medical Colleges, the median level of debt for graduates in 2013 was $175,000!

The main problem is of course continuously rising tuition prices that probably won’t be decreasing any time soon. There’s just too much money to be made for higher education and the big banks. Just to get a glimpse on the current status of medical school tuition, here is a US News report on the 10 most expensive medical schools. Students can routinely graduate with well over $200,000 in debt!

Rising tuition rates are a highly charged political issue which probably won’t be resolved anytime soon. But there is something we can control, and that is how we decide to attack our student loans. Most lenders put you in 25-year-payoff plans, which is a ludicrously long time that leads to hundreds of thousands of dollars in interest.

Here are 5 quick and painless ways to cut your expenses and attack your student loans. These methods have personally helped me to attack my student loan debt and greatly reduce my lifetime interest:

1. Ditch The Gym Membership

Like most people, I thought getting a gym membership was the responsible and healthy thing to do. With rows and rows of treadmills and dumbbells, getting in shape was an inevitability. After a while, I was no longer enjoying the workouts, and made up any and all excuses not to go to the gym. There was the whole process of getting ready, driving to the gym, finding a parking spot, and searching for the least sweaty machine to use. This was going on for a few months until I decided to sit down and evaluate my gym membership. I realized the workout I enjoyed doing at the gym the most was playing basketball. I cancelled the membership and focused on playing outdoor basketball and running outside, two almost-free activities that I actually have fun doing.

Savings: $80/month

2. Look At Your Wireless Plan

I’ve been with Verizon Wireless for a while now and I’m happy with their service. Calls are rarely dropped and their customer service is pretty good. When they changed to their limited data program, I was defaulted into the 4 GB data tier, mainly because it didn’t really change my wireless bill.  After a few months I decided to check how much data we were using, and it was well under half a GB! I get a WiFi connection both at home and work, so I’m not really using cellular data much. I switched us into the lowest, 1GB-tier plan and haven’t felt a data pinch since. It can pay to check the current status of your wireless plan, and make adjustments accordingly.

Savings: $30/month

3. Run That Car Into The Ground

For most Americans, getting a new car every 3-5 years is normal. It’s almost a rite of passage. Ironically, it’s also one of the worst financial decisions you can make. A car is not an investment, yet people are content with paying tens of thousands of dollars and/or getting a high interest loan that will guarantee a negative return. There are alternatives to driving, such as public transportation, carpools, and biking to work.

Savings: At least $200/month

4.  Shop Around For Auto Insurance

The only thing good about auto insurance companies is their commercials. Most of the auto insurance companies are pretty much the same when it comes to customer service. If you look at reviews online, pretty much all the companies have as many decent reviews as bad ones. Reviews may vary, but generally, customer service is pretty much the same across the board. This means that price is the overriding factor in choosing auto insurance, and in my experience it really is worth it to shop around.

I was with Nationwide for around 4 years. I originally signed up with them because a family friend worked for them. I accepted their rate (a little over $200/month) and was relatively happy with their service (except for the fact they charged a fee to pay by credit card). In any case, I didn’t think much about switching until a few months ago, when I decided to get a quote from GEICO. It was $120 less per month than my current rate. That’s over 50%! It seemed too good to be true, so I got quotes from other companies and was consistently getting much lower rates than my current. I needed to switch and after all the numbers were crunched, I ended up saving a little over $100/month.

Savings:  $100/month

5.  Get A Credit Card That Pays

Optimizing credit card use is a mini-obsession of mine. I enjoy finding ways of getting credit card rewards on stuff I already spend my money on. The most rudimentary rewards cards give 1% cash back, which is $10 back on $1000 worth of purchases.  The key is finding cards with higher rates for certain categories like groceries or gas stations and cards with sign up bonuses for certain levels of spending. The Barclaycard Arrival World Mastercard offers 2% cash back on all purchases and a $400 bonus. This can easily get you a few $100 a month here and there. Plus, it’s nice to get something from the big banks.  You do need to be careful not to increase your spending just to get some rewards, as this would wipe out any benefit from the card.

Savings: $10-$100/month

These 5 easy savings tips produced over $400 in monthly savings. Applying that directly to your highest interest rate student loans can make a world of difference. For example, a student loan balance of $30,000 with a 6% interest rate and $200 monthly payment would take 23 years to pay off with just the minimum payment. Applying that $400 on top of the minimum payment, the loan would now take just 5 years to pay off! Truly astounding numbers and proof that making extra payments can drastically reduce the length of the loan and interest paid.

Save Money And Live Life To The Fullest?

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Save Money And Live Life To The Fullest?

Sometimes we engage in some strange behavior because time is illusory. We are born with an indefinite number of years to our name, and a hope to live life to the fullest capacity. This introduces a delicate choice when saving money: save for the future or spend it like there’s no tomorrow.

Present Or Prepping?

What group do you fall under? Do you feel like you’re living and prepping for your future? Or do you spend as much as you want, figuring there can only be so many years left?

Honestly, it seems like a false dichotomy. For me, the reality is more of a balance between competing desires. But that mentality of “living life to the fullest” is propagated in our mainstream culture. Various consumer industries and business leaders encourage this viewpoint. They connect our existence to spending in the economy; if we’re not doing that, what are we doing?

Terrible Estimators

We’re terrible, on-the-fly statisticians. Emotions influence our ability to accurately judge situations that elicit worry, concerns, and/or ambiguity. As a psychology grad student, I can tell you that we over or underestimate nearly everything. When it comes to something as vague and unclear as death, dying, and life, we cannot predict it – despite the desire to.

Skydiving Save Money
Skydiving is scary, but not life-threatening. Photo by: wales_gibbons

When we spend unnecessarily, we are implicitly adding to the assumption that time is exceptionally finite – that there won’t be much more time to enjoy what we have. Again, the reality is that the average life expectancy is about 79 years of age. But if you’re spending more than your budget allows and will end up broke before then, the equation isn’t adding up.

For instance, skydiving seems dangerous – life-threatening, even – but statistically speaking it’s pretty safe. This kind of dialectic debate in our minds can send our mind swirling away from saving money.

Prep For The Future, Enjoy The Present

Here’s the sweet spot: recognize the frailty and fragility of life, while saving for your future. Life may be finite, but that doesn’t mean you have to spend everything you have before then. Psychologists describe this balanced life – between work and life – as reaching flow.

We are likely going to live far longer than our spending habits would suggest. As a Millennial, I will likely live even longer than current estimates. This makes the responsibility to save money more important than ever, while enjoying the present.

My way is to save and pay off my excruciating student loan debt, while treating myself to running marathons, creating a fun personal finance website, and enjoying the company of friends, family, and my girlfriend.

How can you prep for the future and enjoy the present?

Best Checking Account: Ally Bank

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There’s No Interest

Interest rates are shockingly, disastrously low right now. The simple idea is that the Federal Reserve Bank is making access to credit easy for banks, businesses, and shoppers. The goal is to stimulate the economy and encourage spending. Put your money to work by buying that big home and truck! Meanwhile, savers are being punished with puny rates in their bank accounts. It’s yet another tip of the hat to cultural consumerism, as saving seems worthless.

As bank consumers we can’t change the prime rate of interest, but we can position ourselves to get the best interest rate available. At any one time, you likely have a sizable amount of liquidity (cash) in your checking accounts. The smart thing is to make that money work for you (important, since I’m losing 6.8% a month due to student loans).

Fees, Failure, And More Fees

Today’s checking accounts are bloated with fees, minimum open/maintenance requirements, and various stipulations. Quite simply, your checking account sucks. The simple answer: You need to switch. On top of that, it shouldn’t take more than a few hours.

Banks are caught between two epochs. The first is one in which customers walk in and have a relationship with a banker. The real estate, building fees, maintenance costs, etc. – all the niceties are passed onto the customer. That brilliant lobby, friendly greeter, and coffee on the side are all paid for by your idle money and loans. The second is one where customers are in control. No longer are they attached to a singular location. People can move freely around the city, state, country, and globe – never worrying about withdrawing from an in-network ATM or going to a brick and mortar location to deposit a check. In recent years, this market has been dominated by online banks.

Online Banks Are Your Solution

If you’re still stuck in the first version and getting paid 0% interest in your checking account, it’s time to switch. The following are five simple reasons to switch to an online bank:

1. It’s in your interest

While your current bank may pay out as little as 0% interest, online banks regularly pay about .40%. If you carry large balances within your checking account, you can expect even greater rates (at Ally Bank, they pay .75%).

2. They’re at your service

Most banks are open during traditional work hours, which makes no sense whatsoever. Online banks are always available – 24/7 – online and by phone. Oftentimes, you can also use chat features and email. They’re made to work around your schedule. With an app or scanner, you can deposit checks whenever you have the time (~5 mins).

3. No minimums – ever

To have the privilege of holding your money, traditional banks reward you by charging fees for not maintaining certain balances. With online accounts, there are no minimums to open accounts and you don’t usually have to maintain $1,000 a month (or more). These fees, minimums, and penalties only hurt those with lower incomes or can’t balance budgets. By storing your money in online accounts, you vote for a fairer bank for everyone.

4. No more ATM fees

There’s no need to be afraid of that ATM. That $4 fee that the bank charges to give you money out of network is unfair. If you bank without borders, you can withdraw without restrictions. Online banks know that withdrawing your funds is important, and some actually refund your ATM fees at the end of the month.

5. No ridiculous account management fees

Even when a bank gives us all the terms and conditions, there can be confusing stipulations and requirements that end up dinging you every month. Nearly everything is free or without fees when you’re online. Like credit unions, they have a direct interest in making you happy and stealing customers from the bigger banks.

My Recommendation: Ally Bank

I’ve said it before and I’ll say it again: It’s time to switch. One question remains: Which online bank should you choose?

There are plenty to choose from, but the best checking account – at this time – is by Ally Bank.

The interest rates are higher, the customer service is friendly and prompt, and I’ve never once received a fee in all my years there.

Check them out here: http://www.ally.com (This a non-affiliate link)

Why I Can’t Sell My TV – Yet

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Television was left on, like a running tap, from morning till night.
–Aldous Huxley, Brave New World

My Mom likes to say I live in squalor. The exposed cinderblock makes my apartment look like a bat cave; albeit, without the glamour of Bruce Wayne’s accessories. The lighting is harsh in some spots, and ironically, dull where I need it. Poorly insulated walls leave me exposed to Iowa’s elements – both hot and cold extremes. The reality is that this is my home, for now.

While I won’t leave the cold walls of my oh-so-humble abode (affordable housing from university), I’m reevaluating the things I own. What do I need and what could I sell? I started with my car (which is still for sale). Then, like a lion on the prowl, I stalked my apartment for things to sell. It felt like there was little left – I had already done so much paring down.

I thought about needs and must-haves versus wants. As I focused on this, my television stuck out like an eyesore. It was lurking in the corner and cost me $400 after all was said and done. Do I need a TV? Does anybody? My television is the most expensive, optional item in my home, and I hardly ever use it. Should I sell my TV?

Broadcasts were designed in a different era. The word “tune” actually meant something. To have a TV meant being connected with the world around you. Nightly news and programs were shown at certain times and channels.

Maybe it’s purely generational. Maybe it’s technological. Either way, televisions are dying off in favor of computers and tablets. This epoch includes the Internet. Instead of watching at a certain time, you can watch what you want, when you want.

But there’s a reason I can’t part with it just yet. The television can be a social avenue in the right circumstances. How many times do you lean over to your iPhone-carrying friend and ask to watch with him or her? These portable devices that we now accept as commonplace are strangely isolating when it comes to sharing content (they were only ever designed for individual consumption).

A television, on the other hand, is designed to be open and viewed by many. Whether it’s the Presidential debates, a sports broadcast, or a movie with someone special, TVs are still the best option.

That black box takes up a precious corner in my apartment, normally dormant (I don’t really watch “TV”). Maybe it’s time to invite some people over? Or, maybe it’s time to sell it?

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