Student loan repayment and the ethics of personal finance

[This is the third installment in a series examining repaying student loans. Part I was a best practices guide for repaying student loans. Part II discussed an alternative payment plan, Revised Pay As You Earn or REPAYE.]

In my last post on REPAYE, the new student loan repayment program, I mentioned that it might be possible to artificially lower your adjusted gross income (AGI) in order to lower your required monthly payments under REPAYE.

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More about...Debt, Taxes

How do you budget for experiences after debt?

In college, my mind was set on becoming an ethnographic researcher. I wanted to study people and cultures that were new to me while traveling as extensively as possible. After I earned my diploma, I pooled every dollar to purchase a one-way ticket to Costa Rica.

Even with my rookie-style budgeting, I was able to make the trip happen — and it didn't matter that my typical Costa Rican lunch had to be hand-picked avocados and stale bread. It was a life experience I wouldn't trade for the world.

Saving money for practical matters always presides; but once you've eliminated debt from your life, you start to have choices. In my estimation, if you're debt-free, budgeting for life experiences is totally worth it. How do you budget for them, and where do you draw the line? Continue reading...

More about...Budgeting, Debt, Planning

Pay off student loans or invest — how to move toward funding retirement

In my recent post, "Why investing can be better than paying down debt," Dianecy's comment raised a question faced by many: What do you do about investing when you have student loans?

It is quite the dilemma, actually, because the best time to start funding your retirement is when you're still in your 20s. And as anyone who has been reading Get Rich Slowly for more than, say, 10 seconds would know, few things impede your progress toward getting rich (at any speed) like debt.

The reason is simple: A dollar can be spent only once -- either for another person's benefit or for yours. So it follows that repaying debt benefits the bank; investing those same dollars in a CD or index fund, on the other hand, benefits you and your future.

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More about...Debt, Retirement

Why investing can be better than repaying debt

Young man scratching his head

It's a difficult choice: On the one hand, you understand the need to begin investing early to make the miracle of compounding work for you; on the other hand, you know that, when you have debt, making those payments hampers the ability to harness the miracle of compounding.

So, what should you do with that $500 you have -- invest it or pay down the debt? The answer is not as simple as some make it out to be.

Reasons to repay debt first

1. Risk of disaster

As I mentioned in the article about starting to save for retirement, life is not always fair or kind. Most of us depend on a paycheck for everything: rent or mortgage, food, gas, utilities and so forth. When something happens, like losing your job, divorce or severe illness, those checks get smaller, or may even disappear temporarily. We can cut back some of our expenses like gas, clothing, etc. But some things are impossible to cut back. That list is usually headed by rent or mortgage payments and those monthly payments all other forms of debt require. You can't cut those back in times of trial.

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More about...Debt, Investing, Planning

Maintaining liquidity as you reduce debt — how a savings account helps

Are you ready to start killing your debt?

Whether you make the minimum payment or you're ready to accelerate your debt repayment like a mad man/mad woman, you need a strategy to make that happen.

Why you need a debt-repayment strategy

While you have to make the minimum payment on your debt each month, what happens if you want to accelerate your payments? If your budget can accommodate it, that's great. You can pay your debt down faster. But what if, at the same time, you have a competing goal like you want to increase your emergency savings fund or you're uncomfortable tying up some of your spare cash because you expect a change of circumstances?

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More about...Debt

How to start paying student loans – best practices guide

[This is the first installment in a series examining repaying student loans. Part II will discuss an alternative payment plan, Revised Pay As You Earn or REPAYE.]

As someone who started off her debt reduction journey on Get Rich Slowly with some pretty astronomical student loan debt, I've learned the hard way about the repayment process. And with school starting up again and many feeling tempted to borrow, I wanted to share some of that retrospectively gained wisdom.

Best Practices Guide for Paying Student Loans
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More about...Budgeting, Debt

Side job helps chop 25-year payoff plan to 6 months

What do you do when you want to pay off your debt but you calculate it will take 25 years to do so on your current income?

Well, if you're Adrienne Dorison, you start a side business and start shoveling yourself out of debt faster!

Another reason to get out of debt

Before her income grew, though, she still had a large student loan when she started dating The One. She explains that he was a Dave Ramsey fan and, consequently, good with money. The thought of bringing debt into their marriage (now that they're engaged!) embarrassed her.

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More about...Debt, Side Hustles

Alternatives to the multi-generational survival tool

A whole lotta folks are way too comfortable with credit card debt, according to the "Generations Apart" study from Allianz Life. Nearly half of the Generation Xers and Baby Boomers surveyed consider plastic to be "a financial survival tool."

Guys, guys, guys: The credit card is not a superhero. Sure, one swipe saves the day, but it's only that day. What will you do on the day the bill arrives? Or on all the days you carry a balance?

Oh, wait. That doesn't bother some people, either:

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More about...Debt, Retirement

Couple erases $55K student loan debt in 14 months

Andrew and Amanda Argue were both working for public accounting firms in Miami, Florida, when they met. As young, ambitious professionals, they fell right into the hard-charging lifestyle of certified public accountants -- where your rapid ascension to partner is determined by the number of hours you rack up. Managing their career trajectories meant that eating out became the norm because, as Amanda put it ...

“There was no way I was going to work 80 hours and then come home to cook.”
Amanda Argue

Andrew brought $55,000 of student loan debt to the marriage, which he never thought twice about. Amanda had no debt, and it was only after they were married that she discovered Andrew had his.

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More about...Debt, Budgeting

How we saved big with a balance transfer

When my husband and I started dating in 2004, he moved across the country to go back to school and live closer to me. Yep, much to our surprise {insert sarcasm here}, his bachelor's degree in theater arts hadn't helped him land his dream job. Therefore, he decided to do something different instead and chose to pursue a bachelor's degree in mortuary science.

As it is with any life-changing decision, this move had financial consequences. Still, leaving Chicago was mostly a good thing. Not only would he have a chance at a more lucrative career, but it also meant slowing down and abandoning an excruciatingly high cost of living. On the other hand, moving to Cincinnati to finish school meant taking on student loans which severely limited his income for two years.

The Cost of Maintaining Appearances

But we were still dating at the time, and you know what that means. Instead of telling me he couldn't afford it, my husband (then boyfriend) would take me out to dinner, to the movies, and to see or do basically anything I wanted.

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More about...Debt