Tag Archives: 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.

Brittany’s February Debt Progress Report

Brittany's Debt Progress Report - Fun on a Budget Blog

January and February of 2015, mark a major turning point in my debt payoff journey. In the middle of February I gained an amazing husband, his additional income, and really the only raw end of the deal—his student loan debt (to be fair, he is getting stuck with my $43,000 of debt too).  Because of my recent change in income and the addition of a partner and partner’s debts, my progress reports will have to be adjusted as well. We still haven’t ironed out the details regarding how I will be reporting progress, but we have March to get all of that sorted out don’t we :)

Until then, here is my final single lady debt progress report. I nearly paid off half of my debt all by my big girl self in 18 months.  It’s pretty anti-climatic seeing the progress compared to previous months, but the events of the last couple of months are priceless and worth much more to me than a few thousand dollars extra put towards our debt.

The graph below summarizes my short term debt progress across all of my individual loans. The blue column represents my debt totals for individual loans as of December 31, 2014, and the green columns represent my debt totals for individual loans as of February 28, 2014. If you make payments above the minimum monthly requirements, looking at the debt progress in this format really emphasizes how paying more than the minimum has a significant impact on your debt decrease. In January and February I paid only minimum requirements on all of my loans, and as you can see the amount of “progress” I made was very, very minimal.

Monthly Progress on Individual Loans - Fun on a Budget Blog

The bar graph below represents the long term and short term progress I have made on my overall debt. The grey bar represents my original total debt amount, the blue bar is my total debt one month ago, and the green bar shows how much debt I have today. Sometimes it’s hard to feel like you are making progress when you look at your BIG number on a month-to-month basis, but looking back to the beginning can remind you how far you have come.

total debt progress

Having ONE target loan will increase the rate at which you can pay off your debt and decrease the amount of money you will pay towards interest to help you become debt free sooner!

If I was paying above the minimum monthly requirement on my focal loan, the percentage being paid towards interest would have been much smaller—I’ve been ranging between 10% and 16% of my total payment being applied towards interest; however because I paid only minimums on all my loans this month, 29% of my total payments across all loans went towards interest. You want to pay as much as possible toward the principal because that is what helps speed up the process of eliminating debt. The chart below gives you a visual representation of these numbers.

Percentage towards interest

It might seem like cash flowing money right now is rough, but if you make minimum monthly payments until all of your debt is gone, you will end up paying MUCH MORE than your original loan amounts in the long run.

Tell your Income Where to Go

Typically at this point in my progress report I share a pie chart that summarizes where I delegated my earned income during the past month. This month I don’t have a pie chart to share because I actually spent more than I earned. January and February were the final months of using my already-stashed-away savings to pay for the remainder of our wedding expenses. A pie chart wouldn’t represent the actual income and outgo of my cash, but I am considering writing a post to explain how I stayed organized during those two hectic months—well at least organized enough to stay sane 😉

January and February Roadblocks: The big road block was simply having the patience not to debt snowball as I sat on cash that I might need in the event of an emergency or unplanned expense for our wedding.

January and February Dollar Holllllllaaaaaas: No extra scrilla to write home about this month. I’m just happy to have experienced the most exciting day of my life without adding any debt to our already large mountain :)

 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. How do you stay motivated and track your debt progress? I recently read a blog post about living on a budget without a written budget—do you think you could do it?

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 Brittany

* You can find this post linked up with lots of other good financially blessed stuff at Thrifty Thursday, Frugal Friday, and Financially Savvy Saturdays!

Sam’s December and January Debt Progress Reports

Debt Icon

Monthly Progress on Individual Debts

The graph below summarizes my short term debt progress during the month of December and January.

  • The blue columns represent my debt totals for individual loans as of December 1, 2014.
  • The pink columns represent my debt totals for individual loans as of January 30, 2015 (two months of debt payoff).

Looking at the debt progress in this format really emphasizes how paying more than the minimum has a HUGE impact on your debt decrease. You can also see that the debts I made minimum payments on only decreased by a relatively small amount.

2015 Jan Progress Report Ind DebtsI made my minimum payment plus additional payment of $350 toward my principal balance in December and $350 in January (see how I did it at the bottom of the report!). This is a new habit and works best when I make my minimum payment as soon as I receive the statement. Most of my minimum payment went toward my principal balance because I had just paid my previous statement 4 days before (I used to wait until the due date to make a payment).

Total Debt Progress

2015 Jan Progress Report Total DebtPaying more than the minimum has made a significant impact toward decreasing my debt.

 Amount Applied towards interest

2015 Jan Progress Report InterestBecause I made two payments just a few days apart, there was not a lot of accrued interest. Typically, almost my entire minimum payment is applied toward interest.

2015 Jan Progress Report Total IncomeRoadblocks: Saving for wedding expenses and building my emergency fund to prepare for a one income household once I get married has stopped me from putting significant amounts of my paychecks toward debt.

December Dollar Hollaaas: My new side job/hobby has created extra income that is strictly dedicated as debt payoff money. $350 in December and $350 in January were applied toward my principal balance. Thank you Beachbody!

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. How do you stay motivated and track your debt progress? Do you have any tips that help you stay motivated when you aren’t able to put as much as you’d like towards debt because you have other looming expenses?

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Sam

*Part of Financially Savvy Saturdays on brokeGIRLrich and Simple Cheap Mom*

Brittany’s December Debt Progress Report

Header

The graph below summarizes my short term debt progress across all of my individual loans. The blue column represents my debt totals for individual loans as of December 1, 2014, and the green columns represent my debt totals for individual loans as of December 31, 2014. Looking at the debt progress in this format really emphasizes how paying more than the minimum has a significant impact on your debt decrease. My Great Lakes Student Loan 3 is my current focal loan, and I decided to pay a predetermined amount above my minimum requirements before halting my extra payments until after all of my final wedding expenses are completed. My car loan has an interest rate of less than 3%, so even though I only paid its minimum, it decreased by 2.7%. I paid just under eight times the minimum requirement for my Great Lakes Student Loan 3 and in result its total decreased by nearly 6%!! I am only making minimum monthly payments on Great Lakes Student Loan 2, and therefore its total only decreased by .04%. Pretty defeating.

indiv.debts

The bar graph below represents my overall long term and short term debt progress. The grey bar represents my original total debt amount, the blue bar is my total debt one month ago, and the green bar shows how much debt I have today. Sometimes it’s hard to feel like you are making progress when you look at your BIG number on a month-to-month basis, but looking back to the beginning can remind you how far you have come.

total progress

Having ONE target loan will increase the rate at which you can pay off your debt and decrease the amount of money you will pay towards interest to help you become debt free sooner!

Because I was paying above the minimum monthly requirement on my focal loan, the percentage being paid towards interest was smaller—11% of my total payment went towards interest—than percentage being paid towards interest on my other loans—an average of 40%! You want to pay as much as possible toward the principal because that is what helps speed up the process of eliminating debt. The chart below gives you a visual representation of these numbers.

interest

It might seem like cash flowing money right now is rough, but if you make minimum monthly payments until all of your debt is gone, you will end up paying MUCH MORE than your original loan amounts in the long run.

Tell your Income Where to Go

The pie chart below summarizes where I delegated my earned income during the month of December. About 43% of my earned income went towards debt—that includes my minimum monthly payments and extra cash flow. Just below 33% went towards my living expenses (food, rent, etc.), and 24% of my earned income was put into long-term savings this month to sit there until after my wedding so that I can sleep at night. I may have an over-planning problem…

brit.piechart.12-14

December Roadblocks: Because I’ve been over planning ahead for the past few months, I didn’t get hit with any major expenses. I had previously purchased airfare for the Christmas traveling, and while back in the Midwest, I was fortunate to stay with family and share their food and homes (and many other perks that my parents/future in laws provided—like family gym membership benefits, dinners out, and a pedicure—I am spoiled).  As the wedding gets closer and becomes more tangible (aka I actually start making the payments I’ve been saving for) it has been easier for me to stash my extra cash into my savings account without grumbling about it.

December Dollar Holllllaaaas: I was able to milk the Christmas money I received into grocery and spending money for the rest of December (and spoiler alert, since I am writing this post in mid-January) and at least half of January. That’s a few hundred bucks that goes into my savings account!

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. How do you stay motivated and track your debt progress? Do you have any tips that help you stay motivated when you aren’t able to put as much as you’d like towards debt because you have other looming expenses?

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 Brittany

*Part of Financially Savvy Saturdays on brokeGIRLrich and Autoimmune-Protocolling Around the World*

Frugal Friday

Weekend Survival Guide for Girl on a Budget

Issue 61

Every Monday we provide you with our past weekend’s agenda to show you how you can continue to do what you love on the weekend while using your common cents!12.22.14 Weekend Logo Pic

FRIDAY

Begin our travels home for Christmas break! Our ultimate goal on Friday was to make it to James’ mom’s house which was about a 12-13 hours drive. We made a pitstop to pick up a third golden retriever on the way :-) Splitting meals, packing snacks, and bringing water bottles helped keep food costs low.

12.22.14 Snack WeekendFriday Spending Stats:

  • Coffee (lots of it)                                          $10.00 (for both of us)
  • Breakfast at Chik-fil-A                                 $5.00 (for both of us)
  • Snacks from home                                      $0.00
  • Lunch-split Subway sub                             $6.00
  • Dinner at James’ mom’s home                   $0.00

Total Friday Spending: $21.00

Estimated Total Friday Savings: $10.00

 SATURDAY

Insanity max:30, quality time with family, and a delicious dinner helped up recover from a long drive and prepare for another one :-) My future MIL spoiled us by taking us to an AMAZING restaurant with fresh food and interesting flavor combinations…yum!

12.22.14 5 Dogs WeekendSaturday Spending Stats:

$0.00 thanks to our amazing host (aka “mom”)

Total Saturday Spending: $0.00

SUNDAY

Another travel day to visit my family for Christmas. Even less spent on meals and carried our snacks with us. We even got lost and took a scenic detour through DC!

12.22.14 Sleeping Dog Weekend

The amazing standing dog! 11 hours in the car without laying down!

Sunday Spending Stats:

  • Coffee                                                                       $10.00 (what can I say, we love coffee!)
  • Breakfast                                                                  $0.00
  • Snacks                                                                      $0.00
  • Dinner at home with my family                              $0.00 thanks to our hosts/parents

Total Sunday Spending: $10.00

Estimated Total Sunday Savings: $10.00

Total Estimated Weekend Spending: $31.00

Total Estimated Weekend Savings: $20.00

Our coffee addiction (also known as “stay-awake-and-focus-on-driving-for-24-hours-total) contributed to most of our spending over our trip…I have to say…I’m totally OK with that :-) What do you just HAVE to splurge on when you travel?

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Sam

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