Will I be Paying Off my Student Loans When I’m Ready to Retire? What to do About Retirement While You’re Paying Back Your Student Loans

If you’ve been reading my blog for a while, you’ll know I’m in a LOT of student loan debt. I had no idea what I was in for when I started taking out loans for the degree I would eventually get 7 to 9 years after I started. As Melba would say, “sometimes, it’s no easy”. But you’d also know that I’m following the Dave Ramsey method of going all out and paying off my debt with everything I can throw at it.

Fortunately for me, I’m in a situation which allows me to make large payments on my loans. This isn’t the case for everybody though, and I recognize how lucky I am. But I also took out a little more than 2x the average person takes out in student loan debt. No bueno. Also, my situation will be changing soon leaving me with a sizeable amount of debt still to repay with less income to allocate towards it. And with the Biden administration not making any progress towards some form of loan forgiveness, it seems like it’s going to be a long haul.

So with all these financial uncertainties floating around in my life, my question is, “will I be paying off my student loans when I’m ready to retire? ” The short answer, no. Hopefully I’ll have my loans paid in full in the next few years, but this was only possible due to my circumstances being favorable to me paying off debt. I could have easily found myself in over my head with just over 100k in debt, with no plan or financial resources to begin to dig myself out of the hole I dug for myself. Let alone the foresight to plan for my inevitable retirement.

So now that I’m in a place where I’m able to concentrate on my financial situation while making calculated decisions on how to proceed with the future of my finances, what am I going to do with the mess I’ve created? How do I move forward with what seems like an impossible task? Take a deep breathe, relax and take it one step at a time. It won’t be easy, but it’s doable. Let me show you what I’ve found.

Some Resources

I’ve just started reading “I Will Teach You To Be Rich” by, Ramit Sethi on a rec from a friend of mine and it got me thinking about my situation. His book is a great place to start if you’re looking for a brass tacks way to understand your personal finances. Especially if you’re new to the world of investing and taking care of your future monetary needs. Some of the tools he introduced me to are:

Bankrate

This financial website has a lot of powerful tools you can use to get a handle on your personal finances. They have an array of calculators you can use to find out when you’ll be out of debt, like this student loan calculator. They also have an investment calculator as well. Helping you to more clearly map out your future by showing you how far your money will get you into retirement or while paying back high or low interest debt.

They also stay up to date with the latest news about the state of different aspects of finance. For example, they post weekly about the highlights of what’s changing with student loans. This way you can follow what’s happening with the department of education and if their decisions will effect you in anyway. All in all, a good tool to have that specifically deals with the subtle nuances of the financial world.

Doing Away With Fees

Ramit also goes into great detail about how to choose the right bank for your needs. The main takeaway for me was, pick a bank that’s not going to nickel and dime you to death. I remember having a bank account in my early or late twenties, where it seemed as though I was accruing an overdraft fee almost twice a week. And they really added up quickly at $30 a pop. This was mostly due to having overdraft protection, which I ended up using like a line of credit. No bueno.

Since then, and nearly a decade later I’ve finally got savvy enough to switch to a credit union that not only doesn’t have overdraft protection or fees, but reimburses me for ATM fees I incur when I use a foreign bank’s cash machine. No fees while banking is something that has been long overdue and I’m able to appreciate all the more for having to pay the exorbitant penalties I had in the past.

Credit Cards

When I took control of my finances for the first time about seven years ago and realized the mess I had made, I was more than a little concerned. I’ve said before on this blog, my credit card debt was over $20k. Add that to the rest of my loans and bills and I was just north of $100k. And what really blows my mind is, that I just stumbled my way into that massive hole. How was that even possible?

Regardless of how I got into debt, it was me who had to get myself out. I had four credit cards that I paid off in order of lowest to highest balance. This took a while. “The snowball method” was what I used and as Dave Ramsey teaches, gives you the emotional accomplishment of paying off a balance and the added bonus of adding that minimum payment from the last paid off card to the next one.

So when I started my debt free journey, I had four minimum payments to make while I was hammering away at the smallest debt. No matter which angle I look at it from, it took me a while to build momentum enough to start making real payments on my debt. I believe I started my debt snowball with my biggest payment being around $800 towards my smallest balance. Every time I paid off a card, I was able to free up the minimum payment of the card I just paid off, and dump it onto the next target.

I’m now making close to $2k payments on my loans every month. This is psychologically empowering, to see how far I’ve come from my max payment of $800. But I still have a ways to go. And now I have the past experience, as well as the habits that I’ve been building to consistently pay down my debt. And those habits will help me to save for my future once I’m done giving my money away to other people.

I now have one credit card that I treat like my debit card. I only spend what I know I can pay off at the end of each month, aka what I’ve budgeted for. I cash in on the rewards they give me for using their card and thanks to Ramit’s advice, set my card up to pay my statement balance automatically at the end of each month. So I don’t accrue any interest on purchases made. It’s been working well so far, but I’m ready to cancel my card if things change for the worse. I’m done paying high interest rates and would happily go to an all cash system.

The Plan

So now that I have my finances and spending habits under control, what’s the plan? Well, not a whole lot has changed. I’m still planning to pay off my loans first, throwing everything I have at it. Financially it makes the most sense for me. Until I’m down to zero owed, I’m still paying interest which would be about the same amount I’d be gaining on any investments I’d start. I may switch my loan to a bank with a lower interest rate, but for now, they’re in forbearance due to the COVID relief plan. So until May, 2022 I’m not paying any interest. Bonus!

B-E A-G-G-R-E-S-S-I-V-E

So if I’m paying my student loans aggressively, as was the plan since the start, I’ll be able to fund my retirement accounts more fully, sooner. With my current plan, I’ll have my loans paid off in about four years and I’ll be putting close to fourteen hundred towards it each month.

And as I’ve learned with my previous experience of paying down credit card debt, using the snowball method, I can then use those same tactics to start paying myself. First, setting up my emergency fund of six months expenses, and second, maxing out my ROTH IRA contribution and putting any overflow into my 401k through my employer. I’ve built the healthy habits paying off my debt, now it’s time to use those newly acquired skills to make sure I’m taken care of in the future.

And Don’t Forget to Budget!

Above I glanced over a few of the accounts I’ll be using to fund my future. But if you’re like me, and most Americans, you have no idea what these accounts are, or what it means to contribute to them. I’ll be covering some strategies and the accounts I’ll be using in my next post. But for now I’d like to focus on just how important it is to get on a budget and check in with it and how well you’re sticking to it at least once a week.

The $700 Whole Foods Run, AKA I’m going to the grocery, be right back

This was something I said a lot. There’s a Whole Foods about a mile from my house. So inevitably when I would run out of something, I would head down to Whole Foods to pick it up. But while I was there grabbing whatever ingredient I was low on, I would also use this opportunity to pick up a few other impulse items. Candles and essential oil were high on my list of impulse buys (I’m looking at a wooden box full of oils as I type).

Everything was going pretty smoothly until I realized one month, when I was adding up my grocery budget from the previous month’s expenses, that I had spent about $750 on groceries alone! But the real icing on the cake was that this was the second month in a row that I had gorged on my food budget. No bueno.

There were a few contributing factors as to why I was so over my food budget on a consistent basis. One of them being, going to Whole Foods three times a week to be sure. And I’d like to state that I have nothing against Whole Foods. Their products are high quality and I agree with their values and commitment to organic foods. But I can just as easily get most of the products at its more reasonable counter part for less cash. This just makes good financial sense.

Since my realization of how far I was straying from my food budget, I’ve made a few changes to my routines. First and probably most importantly, I’ve stopped frequenting Whole Foods until I’ve paid off my student loans. As I’ve said, I like the store, but as Dave Ramsey puts it, I’m broke. I can’t afford to shop there.

Second, I shop twice a week at the more reasonable grocery store in my neighborhood. Shout out to Market Basket, whose selection is amazing and matched only by their prices.

Third, I’ve upped my food budget. I was trying to live off of $200 dollars a month when I first wrote my budget. This was nearly impossible. Upping my spending in this category allowed me the freedom to buy what I needed without feeling defeated every time I would inevitably go overbudget.

I also check in with my budget once a week, usually more, to see how I’m progressing in the different areas of my spending. This is a step that is crucial in keeping yourself accountable for sticking to your budget. For instance, it’s the 9th of the month right now and I only have enough for one big shop left. So I know that I need to rely on the food I already have in my pantry to help stretch my grocery budget a little farther.

Wrapping Up By Checking In

These quick check ins are invaluable to helping you stay on track with your budget. So set a plan, follow through and check in frequently. Next week I’ll be covering some strategies to help you navigate the waters of retirement. Though I’m not a professional, these are just my opinions of what I’d like to do to plan for my retirement. It seems a little scary and overwhelming at first, but once you understand the basics, you’ll see there isn’t much to it. And if you can develop some healthy savings habits, you’ll be well on your way to a comfortable retirement. Peace : ) and thanks for reading.

Image Credits: “Money” by Digital Sextant is marked with CC BY-SA 2.0.

Not Talking About Money: Why It’s Dangerous to Neglect the Financial Sector of Your Family

Money. This is a difficult subject for a lot of folks. I grew up in a family where it wasn’t just improper to talk about money, it was considered a personal insult to ask questions about the subject (which was the case with most topics really). When I was young, money was something that was scarce. Not to be discussed. This lead directly to me having absolutely no understanding of how money worked. This seems crazy to me now, considering my father worked dealing directly with currency. Also the amount of time my mother spent shopping, I was surrounded by all degrees of it. Water, water everywhere…

The Problem With Money Being Taboo

I recently read this article, sent to me by the only friend I talk to about finances. It’s about, as the article describes it, the “hollow middle-class” and it really hit home. They spoke about how both the rich and poor talk about money often. Though the middle class seldom breach the subject. This is true from my experience and something that left me in the dark when it came to making major financial decisions in my life.

How I’d be making a living was probably the most important decision never talked about. But also how to negotiate salary, ask for raises, ask for benefits, know my monetary value… The list goes on. All I knew was that I needed to work hard, make sacrifices and to just be thankful that someone was giving me money. Or that I had a job at all.

Not Knowing What Your Time is Worth

There was a sense of not having any value, or inherent worth in my family, regardless of how hard we worked or how well we did our jobs. No matter what we did, it was never enough. And I believe this is what was holding us back from discussing how we should be compensated for our work. If we didn’t find value in ourselves, why would someone else find it in us.

So it was with this mindset that I entered the workforce. And subsequently earned far below my capacity. I never thought of myself as having a career because careers were something that were had by responsible adults. And for all intents and purposes, I still very much felt like a child. Being thrust into the workplace under prepared and scared. Of not only not knowing what to do, but also of asking any questions. Mostly for fear of seeming like I didn’t belong and wasn’t the responsible adult I was pretending to be.

Not Having Guidance Managing my Worth

There were few mentors along the way. And I’m not sure I would have recognized them through the fear, had they presented themselves. Which also raises the question, if you’re not talking about money at home, and you’re too scared to ask questions about the subject at work, from whom or where are you supposed to learn this skill? I was raised in a world before Google. So the realm of knowledge laid squarely in the pages of books or with people who had experience. There are those who succeed even in the face of this type of adversity. But they are usually celebrated for being the exception not the majority.

So how do we find out how to talk about the value of our time and find guidance? We spend so much of our time at work, that if we’re scared to talk about compensation, or scared to take time off for fear of seeming not dedicated or replaceable, this can make for a miserable work experience. Not to mention breed a sense of resentment for feeling under appreciated.

Finding Guidance

One place I started, was with Dave Ramsey’s podcast. Dave helps people to get out of debt. Something I had a lot of and still do. With thinking my self worth was contingent on how high my credit score was and taking out student loans at the height of the lending and tuition crisis, I racked up a lot of debt. 115k to be exact.

Without any guidance, it was and is so easy to get caught up in the spending mindset. And before you know what you’ve done, you have eight open lines of credit and are up to your eyes in debt. Dave was a good resource. Not only for his pragmatic advice on money issues, but also for the sizable community he’s created. With three hours a day, and a huge library of past shows and his large community on social media, it’s easy to feel that support and get some sound advice too.

Finding Support From Friends

Finding people to talk to about money is also so important. As I said above, I have one friend who I speak with about my finances often and at all. If it wasn’t for him, I would have zero real life support. His wife works for a small investment firm. Just hearing about his path about retirement and savings has been a huge resource for me on my path. Once I realized that money is a tool, something we use to accomplish things like retirement or a better quality of life, I was then able to demystify it as something relegated to famous or hip-hop artists and start utilize it in my own life.

Not Being Defined by Our Wealth

And you are not defined by your wealth just as a carpenter or gardener aren’t defined by the tools they use. But rather the enjoyment from the buildings they build or gardens they tend to. As I said above, money is a tool and only a tool. It carries no other inherent power to define us than the power we give it.

While I was working on increasing my credit score, I really couldn’t think of another use for money but to spend it. Accruing interest, paying it back and do it all over again was the norm. It never even crossed my mind that I should have an emergency fund or save for retirement! I was living paycheck to paycheck. Completely oblivious to how close I was to economic ruin. But with no one to give me any guidance, how was I expected to know or act differently? The short answer is, I just didn’t know any better. Lessons usually taught by the familial unit.

The Places We Should be Learning Money Skills

There is merit to the idea that basic money skills should be taught in school. Asides from the semester course they may or may not still teach in home economics on how to balance a checkbook. And schools are a great place to do this. Since children have to go and it’s the staging place for the plans we make for living the rest of our lives.

But if you were someone like me, who was already checked out of school due to lack of support at home, the schools would be better off with a platoon of social workers, poised to catch those children from falling through the cracks and caring for those neglected. An updated curriculum with focus on basic life skills would be a great avenue to explore. Making sure the kids are safe and set up to succeed should be first priority.

Schools and Supporting Those With a Lack Of Support at Home

But also, that’s when it’s important to teach these life skills. When we’re still young and learning what life is all about. Learning how to care for all aspects of our well being. Money being one of the more important ones seeing how it has the capacity to do us great harm if not managed carefully. Knowing that we have the ability to care for ourselves. By taking care of our basic needs should be parenting 101. But too many of us never learn how to create and stick to a budget. Or what it looks like to plan for you’re financial future, as was the case with me. And I also recognize that it wasn’t my caregivers faults’. They weren’t given the guidance they needed to succeed either.

And if ignorance is handed down generationally, then how do we break free from the cycles of financial insecurity? I don’t exactly remember how I started on my path, be it the grace of God or whatever, I was ready and took to it with tenacity. And once I started bringing order to my financial house, I started telling everybody who would listen. I told the one friend I talk to about Dave Ramsey and he took to it too. And anytime the subject gets brought up, I try and add my two cents. For people who may not know where to look or are looking to make a change.

Talking about Money is What Really Matters

Regardless of whom you tell, it’s important to talk about money. Maybe you have a group of friends you’re close with. Bring it up while you are hanging out. Or if you have couple friends, it could be worth looking into retirement plans together. Or make a plan with your S.O. to get a consultation from a financial adviser and then talk about it over dinner. You may have a niece or a nephew, cousins or in-laws that you’re close with. Check in with them every once and awhile and see if they’re reaching their financial goals. And don’t forget to talk with your S.O. about your shared plans.

I know from experience that shared money doesn’t work without shared responsibility. Make it a date night, or schedule budget meetings. Whatever it takes, just remember to check in often about your financial goals.

And Talk Often

Whomever it is that you talk to about finance, talk about it often. Check in and bring a sense of caring and levity to it. Finances are scary enough without being afraid we’re gonna screw them up in some way. And the more awareness we can bring to understanding how to care for our financial needs, the better the odds are that we will break the cycles of financial neglect learned from our families.

I’ll be putting some resources I found to be useful when dealing with money on my community page. Mostly budgeting tools and a link to Ramsey Solutions. Also, it’s worth mentioning that you don’t have to pay for most information to help with your finances. And there are a lot of free apps and finance blogs to explore.

Spending money can seem counterproductive when attempting to reign in your finances, so do your research first before spending any money on financial products. And only if it feels right. I don’t think I spent any money on the tools I use. It helps that I have a written budget that I keep in my bullet journal.

So regardless of where you are on your financial journey, whether you’re just starting out learning how to care for your financial needs or have been involved for some time with this area of your life. Don’t forget to find and foster a place for this with your close relationships. Because in this case, spreading knowledge could be akin to spreading the wealth. Something everybody could benefit from a little more of :] Peace, and thanks for reading :]

Image credits: “Home budget. Calculating monthly expenses for rent, electricity, phone, grocery and food” by wuestenigel is licensed under CC BY 2.0

Updated: 7/28/22

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