Every mom wants to know her kids are exceeding in life and one measure of success is being successful with your finances. It was a great feeling for Tish and I to call our moms and tell them we paid off our student loans and then call and tell them we were completely debt free! We could feel the excitement across the phone and it was such a great feeling to make our moms proud. So how do you pay off our student loans early so you don’t end up like the old man in the picture above?
We use and teach the debt snowball method. The idea is to pay off debt in order of smallest balance first rather than the highest interest rate first. Then you take every extra penny you have each week and pay towards the next debt in your snowball. Studies have shown and we have seen with our clients that this is the most effective way to reach this goal. When you start with the lowest balance you see quick wins and it builds up excitement to keep going. But what if your student loans are already consolidated and it is one big loan? This is what Tish and I were faced with. We paid off all of our other debts using the debt snowball and our student loan was this huge single loan. At first we got discouraged but then we started tracking the daily accrued interest. Our student loan accrued interest daily so the larger the balance the larger the interest we paid each day. Tracking the daily accrued interest gave us a new motivator. Sometimes Tish and I would make 4 or 5 payments a month towards our student loans. We would also log into Sallie Mae 4 or 5 times a month, not kidding, and tell each other look we are only paying $X.XX in interest now!! This was such a motivator for us. If you have a large loan balance you need to find what will motivate you.
If you start today you might not be able to give your mom this great gift today but you can next year. The average person takes 18-24 months to pay off all their debt (excluding your house). That means some do it quicker than 18 months. Start today and give your mom the gift of being debt free next Mother’s Day.