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Hey there, Picky people!

As many of you know, Mr. Picky Pincher and I are still in the getting-out-of-debt phase of our early retirement journey. This is arguably the most difficult part of retiring early, but we’re excited to finally see progress!

In 2016 we got rid of $25,000 of debt. This includes our $14,000 credit card debt (read about it here) and a $10,000 car payment debt (read about it here).

Riding on the coattails of a great 2016, I am officially announcing our 2017 debt payoff plan! It’s quite ambitious, but we’re excited to get down to business.

Down with student loans!

Mr. Picky Pincher and I collectively have $65,000 of student loan debt. Ouch! Curse you, private school!

While we both wish we could go back in time to prevent our 18-year-old selves from taking out loans, we’re tackling our responsibilities head-on.

Even though it totally sucks.

Over the next 18 months (so really this is a 2017 – 2018 plan), we plan to have these student loans completely paid off.

Here’s the strategy we’re using to pay off our student loans so quickly.

Cut expenses drastically

We’ve been doing this since our frugal overhaul in 2015.

To cut expenses:

  • We ditched our phone contracts and got Google FI. We pay a quarter of what we paid with Verizon and AT&T.
  • We moved to a cheaper area. This was not an easy decision, but it saved us $400/mo.
  • We cooked a lot more at home. This was a big challenge since Mr. Picky Pincher and I are both Picky eaters and have opposite tastes in food. It took a lot of trial and error, but we found great meals to cook together. We also started making our own staples like bread and yogurt at home.
  • We stopped buying movies and DVDs and rented them from the library.
  • We got rid of one car payment that cost us $450/mo
  • We switched to LED lights and used energy-efficient appliances
  • We stopped going out for drinks and chilled at home with friends.

Paid off higher interest debt first

Once we freed up more funds by living below our means, we tackled our debts.

There are many ways to pay off debt, but we prioritized our credit card debt first since it had higher interest rates than student loans. The amounts were lower, too, which meant we could get them out of the way faster.

That does mean we deferred our student loans, which sucked (P.S. They accrue interest while they’re deferred, so you’re shooting yourself in the foot with deferment, y’all).

It took us a while to pay the credit cards off since we were still figuring out our money-saving strategies during this payoff. If I could go back in time, I wish we had learned to save more money before this payoff, but oh well!

The credit cards are finally out of the way, and that feels AWESOME.

After the credit cards, we had a car payment, mortgage, and student loans to tackle. Funnily enough, the car payment has a crazy-low interest rate, so it doesn’t make much sense to pay that off with cash. The mortgage also has a low rate and a high balance of $145,000, so that didn’t make sense to tackle yet, either.

Our student loans, however, with interest rates from 3% – 7%, were on our radar. $65,000 is a crapton of money. But we crunched the numbers and figured it was the next logical step in our payoff plan, since it was a large-but-manageable sum with a bigger interest rate than our other debts.

Have an emergency fund

After we paid off our credit cards in 2016, we started pumping excess funds into savings to pay for our home renovation—in cash.

Now that the renovation is done, it doesn’t make much sense to keep cash locked up in savings. We decided to have enough funds in savings to cover a month of expenses. If we have to dip into our emergency savings during our payoff, we’ll simply apply less money to the student loans that month, replenish savings, and move forward. That will increase the time of our student loan payoff, so I really don’t want to do that.

The reason we need an emergency fund before our student loan payoff is because we won’t be contributing to savings during this time.

Every. Single. Penny. will go on the student loans. We wanted to have a financial cushion in case one of us becomes ill, loses our job, or we have a catastrophe with our home or cars.

I believe having an emergency fund is the key to avoiding debt after an unexpected life event.

We overpay on our student loans. Like, by a lot.

The minimum payment on each of our student loans is about $300 each.

But guess what?

It’s nearly impossible to pay off those loans with just the minimums. It takes people 10 -15 years to pay these things off because they stick to the minimums or defer the loans. To pay off loans quickly, you need to overpay on them.

By a lot.

I estimate that we’ll put at least $3,000 on our loans each month–which is ten times the minimum payment. Hopefully we can apply more than that so we can meet our 18 month goal, but I know that’s doable.

Again, this is only possible because we cut our expenses and live beneath our means. It took a lot of hard work, planning, and lifestyle changes to do this.

I know people complain about cutting things out to save money, but when you consider the more powerful things your money can do, like smashing huge chunks of debt, it’s all worth it.

The Bottom Line

It’s been a hard but rewarding couple of years for us. We’ve learned how to work together to save money and build a positive financial future.

The next step is to tackle our silly student loans, which will then free us up to eliminate our mortgage. We need to really be on our frugal game in the coming years, but I am so thrilled at the prospect of becoming debt-free!

We want to know: Are you eliminating any debt this year?

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