⚠️ LONG POST BUT CRUCIAL INFO ⚠️Knowing how much interest you are paying on your debt is a CRUCIAL first step to becoming debt free.
Calculating the interest you are paying on your loans can be a pretty enlightening (and sometimes horrifying) experience. But, the information will help you devise the most effective debt payoff strategy.
It’s important to calculate your monthly interest because if the payment you are making is less than the monthly interest (which is often the case with income based repayment plans for student loans), your principal will NEVER go down, and you will literally be making payments for eternity. In fact, your balance will actually increase.
Can you imagine making payment after payment on time and in full, and your balance actually increases? That’s exactly what will happen if your monthly payment is less than the interest that accrues monthly.
When I first started this journey, my monthly interest was $431/month. That meant I had to make payments above $431/month to gain any traction at all.
Do yourself a favor and calculate your monthly interest. Take it a step further and calculate your daily interest too. When you’re paying $6 or $14 or heaven forbid, more, in daily interest, the ol’ “its only $5” justification starts to get pretty weak when you’re mindlessly spending.
To calculate your interest, use this formula: loan balance x interest rate converted to a decimal (move the decimal 2 places to the left). Divide the answer by 12 for monthly interest or 365 for daily interest.
For example, my loan balance is currently $12,183 at 5.625% interest. 12,183 x .05625 = $685.29. $685.29/365 = $1.87 in daily interest. Or, $685.29/12 = $57.10 in monthly interest.
What’s your monthly interest on all your debt? Are your minimum payments covering at least that amount? Let me know in the comments below.
And check out my saved stories under side hustles for ideas on how to increase your income to help increase your debt payments, if you need help getting your monthly payment amount above the interest.
T E A M W O R K // Grateful to be surrounded by a team passionate about changing lives and attacking #StudentLoanDebt
B I G things are coming from the team & I this fall.
10 Stundes vor
I'm kicking my butt back in gear this morning.
I got a little behind on tracking my spending and scanning my receipts.
One question I keep getting is, "what is the best way to start over after falling off the budgeting bandwagon?" Maybe you got behind on tracking your expenses, and it would take a lot of work to try and backtrack. Maybe you had an expense pop up that completely derailed your budgeting plan, so you got discouraging for awhile. Maybe you overspent a lot in one category and are now trying to decide how to move forward.
My answer, leave the past in the past & start fresh.
It's okay if you started budgeting, and then stopped. It happens. What matters is that you don't quit. You keep trying.
There is no BEST time to start over. Now is the time.
Don't pay any attention to your worksheets in the past. Don't even look at them, unless it's to look at past expense trackers.
Start tracking your expenses and spending, and restart that budgeting calendar. Start with your next paycheck, and create that paycheck budget.
Starting fresh is like finding a new sense of motivation. It's telling yourself, "I got this, and I'm going to start working on my goals today." Take it one baby step at a time.
There is always something you can do right now to make a positive impact on your finances. For me, I just started tracking my spending. That one baby step fueled forward movement, and then I was motivated to continue.
Today is a new day to do better than you did yesterday. Not next month. Not in a week. Not tomorrow. TODAY.
What is one thing you did to get back on track with your budget?
Tomorrow I’m meeting with some incredibly inspiring women to discuss my goals for a career in research. This conference has made me more determined than ever to push forward with my plans, as I know I have the support from my husband and my employer.
Trying to sit down and organise my thoughts on paper before our lunch. It’s only a casual catch-up, but I’ve shifted gears over the last couple of days and moved from a general curiosity, to a real focus.
It would mean a whole new strategy in our debt pay-off plans, but I’m working through our math and it doesn’t seem impossible.
This girl can.
23 Minutes vor
I truly believe in this. I come from a middle class family.
My parents were first generation, meaning they came to England over 27 years ago from their country with less than £500 to their name. They have been able to build their assets and their property portfolio.
This still does not mean they are absolutely rich.
Every parent wants their children to do better than them. That is also my goal.
Having the opportunity to study and work & being born a British citizen is a blessing. I do not want to live in vain, I want my children to have a great life and be able to reap the benefits I have saved and worked hard for them! These are some of things I think about as I begin this debt free journey. It all starts now. #debtfreecommunity#debtfreejourney#motivation#firstgeneration#savingmoney#frugalliving#frugal#savinggoals#savingchallenges#budgeting
I’ve been reading a lot on calculating our net worth, to better understand our financial health. But I need some advice, and the debt free fam have it in spades.
So ~ how best do I value an asset we haven’t got a value on? Difficult without context, hear me out.
We’ve been gifted 5 acres in beautiful bush land by my parents-in-love. Our whole reason for debt freedom and this journey to financial independence is to be able to build our dream home up here and reduce the amount we work. But.. The land is currently going through re-zoning, so we don’t have an accurate figure on how much it’s actually worth.