Category Archives: Getting out of Debt

Financial Forecasting: Using a Financial Aid Loan Calculator to Strategize your Debt Repayment Plan

Financial Forecasting: Using a Financial Aid Calculator to Look in to your Financial Future - Fun on a Budget Blog

When I was younger, I used to play this weird game in my own mind where I would try to guess exactly what my life would be like in X amount of days or X amount of years. For the most part, this quirky pasttime, which I later dubbed “Future Game”, consisted of me interrupting my typical daydreams (something monumental I’m sure, like contemplating where exactly I should part my hair) to ponder some bigger and more exciting unknowns: Where will I be living? What will I be thinking about? Who will I be with? Will I have met my husband yet—or even weirder, have I met him already and don’t even know it? Will I be in good shape and still have all working body parts? But my favorite question to ask was always this one:

If I could see the future me, how would present me feel?

photo credit: www.moreintelligentlife.com

Clearly, I am not and never will be a world renowned philosopher, but I still think that playing “Future Game” and musing over what is to come is an interesting way to get lost in thought.  As I was playing “Future Game” a few days ago—wait did I give you the impression I quit playing—oh, I’m sorry, I should have made it more obvious that “Future Game” was invented in my younger years and is still going strong!  I know, I know, everyone probably wishes they could hang out with me on the weekends now that the secret is out about how cool and exciting I am 😉 All jokes aside, I recently created a more fact-based variation of “Future Game” that I’m calling “Five Year Financial Future Game” (creative I know).  I  used a Financial Aid Loan Calculator to plug in the numbers for two different debt repayment strategies:

  • STRATEGY ONE: Making only Required Monthly Minimum Payments
  • STRATEGY TWO:  Making Monthly Minimum Payments AND Contributing as much Additional Money as Possible

If you are having any second thoughts—or no thoughts at all—about putting extra money towards your debt, then I suggest you play “Five Year Financial Future Game” too. The results were MUCH more DRAMATIC than I had anticipated. Here is what I found:

Making only Minimum Payments on my Debt for the next 5 years results in…

Me making minimal financial gains. If this is the route I choose to take, five years from today I will still be putting $616.59 towards my student loan debt every month. My total debt numbers will be lower, but essentially nothing else will have changed because I will still be 2.7 years away from escaping my biggest financial burden. Even worse, when it is all said and done, I will have paid over $12,000 in interest alone! That is nearly 1/3 of the total debt I owe. Ouch!!

Financial Foreasting: Using a Loan Calculator to Determine where you will be Financially 5 years from Today.

Financial Forewarning: Minimum Payments will only take you so far…You get what you give.

Paying as much Money as I can towards my debt over the next FIVE 1.5 years results in…

Me only being in debt for 1.5 more years! That is no joke, folks. By putting more than 50% of my income towards paying off my debt, five years from now my debt-paying days will be 3.5 years behind me, and I will have paid just $2,700 in interest (that is only 6% of my total debt).  In comparison to using the strategy of scraping by on minimum payments, paying off my debt faster will provide me with an additional 3.5 years to do whatever with the money that would have otherwise been going towards loan payments, and I will save $10,000 in interest alone! Retirement savings, vacations, home buying, college funds–you name it, and I have the extra funds to work towards it. Yes, please.

Financial Forecasting: Using a Financial Aid Calculator to Look in to your Financial Future - Fun on a Budget Blog

Playing the “Five Year Financial Future Game” helped me discover that when it comes to paying off debt, a lot can happen in just 5 years. If I work a little bit harder, spend a little lot less, and pay attention to where my money is going right now, I could be debt free before potential BIGGER expenses and limitations (ex: children, mortgage, etc.) have a more significant impact on my life. Using the Financial Aid Loan Calculator makes the “game” a reality and allowed me to see accurate financial forecasts for each debt repayment strategy. After seeing the major effect that today’s actions have on my financial future, “present me” just can’t stomach the thought of choosing some instant gratification over long-term success and comfort.  How could I crunch these numbers and not buckle down sooner rather than later?!?!

Actually doing the math and facing reality can be so eye-opening. Did you use the Financial Aid Loan Calculator to play the “FIVE Year Financial Future Game”? Does looking at your Financial Forecast have an impact on how you are choosing to pay back your debts now, and what is the main factor in how you have decided to eliminate debt?

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This post is linked up at Alex and Cassie’s Thrifty Thursday, at Living Well Spending Less, Financially Savvy Saturdays, and Frugal Friday.

Mythbusters: How to Make Your Debt Payments Count

Lies and MoneyCongratulations! You’re doing great on your debt snowball…paying off loans like it’s your job and suddenly the last loan on your list is your student loan managed by Navient (the old SallieMae) or some other federal student loan company. Unlike most of your other debts, you don’t have the choice to click a button that says, “I want to allocate this payment toward my principal balance” which forces you to pay your OLD interest rate without making a dent in your principal balance.

The Problem: When you pay online or call to make a payment, you’re unable to allocate extra payments the way YOU want to allocate them. When you make an extra payment online or over the phone, your payment is applied to outstanding interest.

What That Means: You are paying down your already accrued interest without making a dent in your principal balance. Your goal should be to decrease your principal balance as much as possible because the interest accruing will end up being LESS because the interest charged is based off of a smaller number. Confused yet?!

The Solution: If you search and search and search on your federal student loan service providers website, you will see a little tiny line that says, “you can allocate your payments differently if you mail in your extra payment with a WRITTEN notice describing how you want the payment allocated”. Tricky, tricky, tricky.

AVOID: What you don’t want to happen is make extra payments that results in payment due dates that get pushed further and further in the future. You want your extra payments to go toward your principal balance ONLY! That means, even when you make an extra payment, your normal balance is due the next month.

The LIE: If you call Navient or your federal student loan provider, they will tell you over and over again that, “your extra payments are applied toward your accrued interest”. They will not even mention any other option, even if you tell them that you read online that you can allocate payments differently. They are out to make money and the more money you pay in interest, the more money they make. DO NOT settle…this is YOUR hard earned money and you want to do what’s smartest and will eventually save you THOUSANDS!

If you’re confused, extra payments should ALWAYS go toward principal balance.

image

How have you been allocating your extra payments? Have you seen a drastic decrease in your principal balance? What’s your “trick” to making your payment count?

For more information on how to gain control of your finances check out our info on Getting Started by clicking the link in the menu bar at the top of the page.

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Sam

Disclaimer: This blog post is based on my personal experience with my student loan service company. Not all student loan companies have this policy.

Sam’s post is also found linked up with other brilliant folks on Financially Savvy Saturdays. Click the button below to head on over!

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7 Days to a Debt Payoff Plan

Starting your debt snowball or a plan to pay off debt, can be overwhelming, scary, and frustrating. Procrastination is a major roadblock for many people who are faced with the task of paying off debt because it can make a person feel like he is staring up to the summit of Mt. Everest and being asked to climb it!  If sitting down and trying to tackle the job of getting organized to pay off your debt makes you want to put on your tennis shoes and run in the opposite direction, you are not alone. I’ve been there too. That’s why I’ve come up with 7 days of “jobs” that will have your debt payoff plan feeling less like climbing Mt. Everest and more like stepping over an anthill :)

debt snowball defined7 Easy Steps to a Successful Debt Payoff Plan

Day 1: Gather it up. Find all of your student loan/debt paperwork (including the car, mortgage, etc.) and put it in one spot/folder/pile.

Day 2:  Protect it. Find all passwords, and create a word document labeled (something like “debt payoff”, “debt snowball”, “hello financial freedom”) for all of your usernames and passwords. Create accounts if you don’t have one.

Day 3: Get technical. Log on to all of your debt accounts. Make sure that you save them on your web browser as a “favorite” so you can easily click and go.

Day 4: Create your DEBT SNOWBALL. Either write down or start a word/excel document listing your debt totals in order from smallest to biggest. Include interest rates.

Day 5: Schedule it. Write on a paper calendar and in your phone all of your payment due dates. Set an alarm to alert you of a payment 2 days or 1 week before each payment is due to ensure on time payments and avoid fees.

Day 6: Plan ahead. Use your budget to decide when (month and year) you will make your first EXTRA payment.

Day 7: Easy access. Make a filing bin, cabinet, or folder for your debt paperwork ONLY! Put it in a spot that is easy to access. Most people are more willing to do something more often if it’s convenient (i.e. fast food, pre-packaged foods, etc.). Make it easy on yourself and make your debt snowball information easy to access and organized!

debt snowball picThere it is. In just 7 days you will go from, “I just pay the minimum and forget about it because it’s too overwhelming to look at” to “My first extra payment happens on 12/1”! Congratulations on taking years off of your total debt payoff time!

debt snowball congratulationsHow did you begin your debt snowball journey?

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Sam

10 Scary Facts about Debt

10 scary facts about debt

Halloween is just a few days away, and we couldn’t pass up the opportunity to get a little bit spooky this week. Don’t let these 10 Scary Facts about Debt become your own personal nightmare!

1. Currently, more than 40 million Americans hold student debt. The population with student loans is actually greater than the entire population of Canada, Poland, North Korea, Australia and more than 200 other countries. It’s also about four times greater than the population of Sweden.

2. The average American pays $600,000 in interest during his/her lifetime.

3. Forty-Three percent of all American families spend more than they earn each year.

4. The average age at which Americans expect to be debt free is 53 years old!

5. Seventy percent of college graduates in 2013 are graduating with debt.

6. The very last time the United States Federal government was completely debt-free was January 8, 1835. when Andrew Jackson was President.

7. If you have $10 in your pocket and no debts, you are wealthier than 25% of Americans.

8. In 2013, outstanding student loan balances reached more than $1.2 trillion, which is more than any other type of debt, except a mortgage.

9. A typical credit card purchase ends up costing 112 percent more than if cash were used.

10. Nine of 10 Americans claim credit card debt has never been a source of worry, but 47 percent would refuse to tell a friend how much they owe.

pumpkin butt

I tried to find some debt horror stories that would be worthy of campfire story telling but most of what I discovered online was more self-pitying that bone-chilling, so I guess we will end the list with a full moon dedicated to debt instead :)

You can also find this post on the Financially Savvy Saturday Link Up–along with some other great financial reads!

brokeGIRLrich

Do you have a debt horror story? Please share it with us in the comments!

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♥ Brittany

Sources: 
1. http://www.forbes.com/sites/timworstall/2011/12/14/six-waltons-have-more-wealth-than-the-bottom-30-of-americans/
2. http://www.huffingtonpost.com/kyle-mccarthy/10-fun-facts-about-student-loan-debt_b_4639044.html
3. http://www.biblemoneymatters.com/being-normal-costs-an-average-of-600000-over-a-lifetime-heres-why-we-are-fighting-back/
4. http://www.cbn.com/700club/guests/bios/Howard_Dayton060506.aspx
5. http://www.creditcards.com/credit-card-news/credit-card-industry-facts-personal-debt-statistics-1276.php
6. http://www.fidelity.com/inside-fidelity/individual-investing/college-grads-surprised-by-student-debt-level-exceeds-35000
7. http://www.npr.org/blogs/money/2011/04/15/135423586/when-the-u-s-paid-off-the-entire-national-debt-and-why-it-didnt-last
8. http://www.brookings.edu/research/papers/2014/05/student-loan-debt-rising-gale-harris
9. http://thecoachnate.com/get-rid-of-the-broke-folks-in-your-life/
10. http://www.fiero.nl/cgi-bin/fiero/showThread.cgi?forum=Archive-000003&thread=20090907-6-053971&style=printable

Student Loan Debt: 5 Things I’d tell my Pre-Graduate Self

According to a study conducted by The Project on Student Debt, 7 out of 10 college seniors who graduated last year left with more than a new degree–they also acquired an average of $29,400 in student loan debt. That means 70% of college graduates enter the workforce with a net worth that is in the negative because of their student loans. That. Is. Crazy. I was lucky enough to complete four years of college without acquiring any student loan debt thanks to an athletic scholarship and super amazing parents that were able to chip in to cover the rest. Then came graduate school a few states away from my home and with that–unfortunately–I hopped on the student loan debt bandwagon and found myself with a Master’s Degree and $60,000 student loan debt!

Obviously I can’t (and wouldn’t) want to go back and change everything. I LOVED moving to a different part of the country and exploring an environment outside of the one I had lived in for the past 22 years. I LOVED the people I met, the graduate program I went through, and the experience I had. After living it, I can’t say that I would hop in a time machine and make a drastically different grad school decision if the option was there–even to get $60,000 of student loan debt off my chest (gol’ darn emotions and memories). However, looking back with my wise and student loan debt ridden eyes, I can say that there are definitely a few things I wish I would have done a little bit differently…

1. “Budget”: I have always been pretty good about money. I’ve never been a frivolous spender or someone who had no concept of spending less than what you earn, but I didn’t completely understand what a “budget” was. I thought I was on a budget because I KEPT TRACK of what I was spending AFTER I had already spent it. For example, one month (during football season) I spend over $400 on going out to eat, bars, and beer and didn’t know it until AFTER I had already spent it. My thought process was, “Well next month I’ll spend less”. I didn’t always stick to the plan to “spend less” because I was missing the key concept of a “budget”…I didn’t dictate HOW MUCH I was actually going to spend. Keeping track of what I was spending was a starting point, but it didn’t stop my money from disappearing without me knowing where it went.

Tailgating pics

Tailgating could have been my second major ;-)

2. Get a Job. I go back and forth about this one all the time. I was in a program that was more than a full-time job commitment between classes and clinicals, not to mention homework and studying. I had actually applied to 17 jobs during my first semester (and got calls back from a few), but I was living in a college town and just didn’t have the connections I needed to work in the bar and restaurant industry. I felt like bars and restaurants were the way to go since you take home cash that night and can easily make more than minimum wage. Scheduling was a problem because I wasn’t finished with work or clinic until 5pm or later most nights and restaurants wanted me there earlier to begin the dinner service. All excuses aside, between my schedule and my mindset at the time, I should have gotten some sort of job to create some sort of income.

3. Find another way. This is controversial. Dave Ramsey says, “Don’t loan money to family. Give it as a gift or don’t give it at all”. I definitely know that philosophy is completely correct, but I wish I would have tried asking grandparents and parents for some sort of “loan”, even if it was loaning me the money to buy my books each semester or helping me pay my rent each month. I don’t know if this actually would have happened, but if you have family members that have extra money and want to “invest” in your education, ask if they want to loan you some money (you can both sign a written agreement if it makes you feel better) while you’re in school and start paying it back after you graduate at a low interest rate. That way, they’re investing their money wisely (because we know you’re responsible and would pay them back quickly ;-)) AND you don’t have to eat 7% interest from DAY ONE! It’s worth a try!

Beach Pics

I couldn’t believe I lived so close to “the sea”!

4. State Schools. This one is SO hard for me to put on here, because I didn’t do it, and wouldn’t do it if I had to do it all over again. I loved the experience that I had, but if you’re someone who’s looking to go back home or stay near home (or in the same state), a state school is the way to go. Most of the time they are great schools and cost way less per month than most others (aka a great value).

5. Work/Study & Internships. This is an easy way to “make money” or get cheaper tuition without a scheduling conflict. Most work/study programs are within your program or will work with your program to make sure your hours don’t conflict with academics. Internships are usually within your program and can range from simple to very involved. Not only are these great ways to make extra money, but it’s a great way to make connection and meet awesome people!

Graduation School Pic

Celebrating the end of an amazing (and extremely difficult) two years!

Have you learned any lessons about finance recently?! Follow the “Reply” link at the top of this post to share your thoughts with me and Brittany! If you could reach out to your pre-graduate self to give advice about student loan debt, what would you say?

Student Loan Debt: 5 Things I’d tell my Pre-Graduate Self can also be found on the Financially Savvy Saturday Link up happening over at BrokeGirlrich. Be sure to click on the button below to head on over and check out all the other savvy posts!

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Sam

My Life on a Budget: A Year in Review

title pic

Just a little over a year ago Sam and I decided to start Fun on a Budget Blog to document the outcome of 20-somethings trying to live well on a budget. We wanted to share our financial battles and triumphs as we fought the good fight against our debts and gave our best effort to keep living lives that kept us happy and excited to get out of bed each morning.  We had a few different purposes in starting the Fun on a Budget:

First, we wanted to support other people that were in the same situation as us. Debt is one of those topics that most people are ashamed to talk about, so we knew that there were probably many silent sufferers out there that could use some help.

Second, we wanted to learn more about how to be better with money…and we have learned A LOT!! A huge amount of research and many conversations happen each time we prepare for a post, and from those actions new knowledge is gained.

Finally, Fun on a Budget Blog was a way to stay motivated to keep our focus and momentum strong because after all, paying off debt can be a long term and difficult goal to achieve. Fun on a Budget Blog has 100% fulfilled its role in being a tremendous motivator for staying focused on our end game of getting debt paid off as quickly as possible. Every month we sit down and write up an entire report about how much debt we’ve ditched or how much money we saved, and this gives us the opportunity to reflect on what we are doing well and what we need to start doing a little bit better. Don’t get me wrong, I do hope that people like our budget blog, and I hope that if some Googler stumbles upon it (probably on the 5th page of search term results, haha), that it will help him in some way—but at the end of the day, if I it’s just me, Sam, and our moms reading the darn thing, we are okay with that. We’re okay with it because we truly enjoy not just living on a budget, but writing about it.

So, here we are one year later, and it just wouldn’t be right not to reflect on how being on a budget has impacted our lives, right? I must say that I originally assumed I would post about how my budget has impacted my debt only, but once I started taking a deeper look at all that has happened (or not happened) and changed over this past year, I realized that the debt numbers are only half of it :)

Debt by Numbers: How Being on a Budget for a Year has Impacted my Debt

Debt by the Numbers-Comparison

In just one year I have cut the number of total debts I owe in half, went from having paid off zero debts to having three fully paid loans under my belt, decreased nearly all of my debts to less than the original amount I was loaned (interest is the WORST), reduced my minimum monthly payments by over $200.00, and decreased my overall debt by nearly $25,000.

Income distribution

From August 2013 to August 2014, my income was delegated into three different categories: debt payments, living expenses, and savings. Just over half of my income went towards my debt snowball, 37% was used for living expenses like rent and food, and the final 11% went into my savings account–which was primarily used for Christmas shopping and wedding savings.

Ind. loan progress

The chart above gives a more detailed look of how being on a budget can have a significant and positive impact on getting rid of your debt.

 Yeah, Yeah, Yeah…So you paid off a lot of debt, but what else have you done??

Well, you might be surprised :)

One of the most rude frequently heard comments that comes out of someone’s mouth when he/she learns I believe in sticking to a budget is “Oh, I couldn’t put myself on a budget because I still want to do things.”  Give me a break…I was on a budget from August 2013 – August 2014, and I did A LOT of “things”.

During my first year on a budget I…

what i did 2

what i did list

And I did a little traveling too…

travel2

travel list

The good, the bad, and the really really good

I would be a big, fat, dirty liar if I ended this post with my fabulous traveling pictures and told everyone that being on a budget is all rainbows and ice cream cones all the time. It’s not. You aren’t idiots, and you already knew that.  I hopped on the waaambulance a handful of times during my first year on a budget, for a variety of different reasons—missing the bridal shower and bachelorette of a bestie, missing the wedding of another, keeping my own wedding small, and no longer being Anthropologie’s #1 customer—are a few that really got under my skin and left me flustered for days.

When you are on a budget you cannot do 100% of the things you want to do, buy 100% of the things you want to buy, or travel to 100% of the places you want to travel. You must pick and choose, but whenever I feel down about being on a budget, I remind myself that one of the most important and impacting choices I made in this past year was to LIVE on a BUDGET. Because that choice brings good things to me now—like paying off debt quickly and never bouncing checks—and will bring really-really good things to me in the not-so-far-future—like being able to save for retirement and use money to travel and celebrate in the present —the blips of “bad” that I’m experiencing just don’t seem so bad. :)

Sam lived on a budget this past year too! See how she fared by clicking the link: Sam’s life on a Budget: A Year in Review

For more information about transitioning to life on a budget click on our “Getting Started” link in the menu bar at the top of the page, and get your free printable budget by visiting our “Materials” page.  We have a couple of options for you there.

But enough about me…I want to hear about your experiences on a budget–what works and doesn’t work? What are the best and worst parts of holding yourself accountable with money? Follow the “Reply” link at the top of this post to share your thoughts with me and Sam!!

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 Brittany

11 Reasons to Get Out of Debt Fast

There are various schools of thought related to getting out of debt and how to go about it. As you all know, Brittany and I learned from Dave Ramsey and believe that the faster you get out of debt, the less money you’ll end up paying in the long run and the faster you’ll be able to start using the money that you earn. If you’re not already convinced to attack your debt and get rid of it as fast as you can, these 11 reasons may get you to jump on the wagon.

1. Monthly Bills. You will have one (or multiple) less payment per month. This means that you will spend less money on “living” (i.e. rent, utilities, debt) and more money on L-I-V-I-N (i.e. trips, pedicures, vacations).

2. Your money is YOUR money. Goodbye to your conscious that says, “Don’t go out to dinner with that extra money because it’s not YOUR money, it’s the government’s” and hello to your conscious that says, “Go to dinner and treat your friend because it’s YOUR money”. Living on an income that is not exactly YOURS because you owe it to debt makes me feel guilty if I’m spending money on anything other than necessities. I’m ready to be able to use my money how I want!

photo credit: www.news.ubc.ca

photo credit: www.news.ubc.ca

3. Gifts for others. You know all those weddings and birthday parties you go to and bring a $25 gift card or a homemade item because you can’t afford anything more? Once your debt is gone, you can give more meaningful gifts to friends and family.

4. Food. I don’t know about you, but I love food! I love a variety of healthy, whole foods but can’t afford ALL of the healthy food that I want all the time with my current grocery money budget. I make it work for me right now, but I could easily extend my food budget a little more to include a larger variety of whole, organic fruits and vegetables. Going out to dinner at restaurants with healthier foods is also a priority when I’m debt free. Right now, Mexican it is!

social life

5. Social Life. I’ve actually been able to sustain a pretty great social life while on a budget. Realistically, I don’t think much will change when I’m out of debt except for attending more shows, concerts, and races.

6. Work. Work seems harder when you NEED it. I show up to work everyday knowing that I NEED the money that I am making that day. One day, it will be nice to go to work knowing that I WANT it versus NEED it. Luckily, I have a job that I absolutely love, but I also NEED it.

travel

6. Travel/Vacation. This is another area that I’ve been able to sustain while being on a budget. The downside is, when I purchase flights to various places around the country, it takes money away from my debt snowball or savings. When I’m debt free, I will be able to enjoy a separate “travel fund” which will allow me to guilt-free budget for trips without taking money away from another area of the budget.

8. Volunteer/Donations. There are so many great charities out there to donate toward or volunteer for. When you’re working your debt snowball, there’s little room for monetary donations and little time to “work for free”. It will be nice to be able to donate or volunteer for wonderful charities and organizations once I kick Sallie Mae out of my life.

treat yoself

9. Treat cho self. This is probably the most selfish and vain item on my list, but it is just so true. I want to get my nails, eyebrows, and hair done by someone other than myself and without that being my “social event” of the week! Can I say “wardrobe upgrade”?! Although these things are not the important things in life, I could use some new summer dresses and running shoes.

10. Relief. If I don’t get out of debt FAST for any other reason, THIS is the sole reason I want to get out of debt FAST. Relief. Relief of debt bills. Relief of owing someone. Relief of deciding where my money goes. Relief of visiting friends and family. Pure relief of telling my money where to go, and making sure it’s NOT going to Sallie Mae.

11. Savings. Remember that house I want to buy one day? That years worth of flights to visit friends and family I want to have? The new bed? TV? Retirement?! I can’t start saving significantly until I get out of debt…so stop procrastinating and DO IT NOW!

For more information on starting a personal budget, check out our Getting Started tab at the top of the page.

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