TODAY ON REASONED REFLECTIONS:

• How I paid off $50k in student loans in 18 months;

• Personal finance articles 💰;

• Something I’ve learned since Reflection No. 4 🤓;

• Quote of the Reflection.

Reflection No. 5: How I Paid Off $50k in Student Loans

Hey, personal finance wiz!

I want to share my wild journey to paying off $50,000 in student loans in just 18 months. Sounds impossible, right? Well, it wasn’t easy—it took grit, sacrifice, and a few creative moves that some people might not think of. From working two jobs and slashing my living expenses to cashing out an old life insurance policy, I used every tool at my disposal to attack my debt head-on. I even took some risks I wouldn’t recommend to anyone else. But if you feel like your student loans—or any loans for that matter—are an impossible mountain to climb, keep reading. You might find a strategy that works for you!

I - Issue: How did I repay $50,000 in student loans in 18 months?

R - Rule: Paying off student loans quickly requires discipline, sacrifice, and finding creative ways to maximize income and minimize expenses.

A - Analysis: Paying off $50,000 in student loans in 18 months seemed impossible, but I paid off my loans as fast as possible with a focused approach. My strategy was a mix of working multiple jobs, cutting expenses to the bone, and finding ways to pay off the loans faster. Here’s how I did it.

After graduating, I landed a full-time job, but I didn’t stop there. I kept working part-time at a grocery store where I had worked during college. Every dollar I made at my extra job went to repaying my student loans. While this meant long hours and a lack of free time, it also allowed me to chip away at my debt much faster than if I had relied solely on one income stream. 

I also cashed out a whole life insurance policy my parents had taken out on me when I was born. Whole life policies accumulate cash value over time, and by the time I graduated, there was about $1,500 in the policy to make a meaningful dent in my student loans. I used the cash value to pay down a chunk of my debt and replaced the whole life policy with a term life insurance policy. Term life insurance is much cheaper, so I could access the cash value of the whole life policy while still being covered. This strategy allowed me to use an asset to reduce my liabilities.

One of my riskiest moves was taking Dave Ramsey’s advice to keep $1,000 in an emergency fund. However, I took it to an extreme. I reduced my emergency fund to just $100 in my checking account. I put every extra dollar towards my loans. I was paying down my loans quickly, but I also had to be hyper-vigilant with my spending and budget. I monitored every payment and bill to avoid overdrafting my account (I came very close to doing that at one point). This wasn’t a stress-free approach (it was actually very stressful), and I don’t recommend it to others. While it worked for me, living on such a thin margin was risky, and if any unexpected expense had come up, I would have been in trouble. A small emergency fund is a standard piece of financial advice, but shrinking it to $100 is a strategy most people should avoid.

Next, I signed up for auto-pay with my student loan servicer to save on interest. Many student loan companies offer a small discount on interest rates—typically around 0.25%—if you enroll in auto-pay. Saving 0.25% on the interest rate may not sound like much, but every little bit helps. By reducing the interest I paid, I could dedicate more of my payments to the loan principal, which helped me knock down my balance faster.

As for everyday living, I lived as frugally as possible. I always cooked at home and stuck to a strict grocery budget. I wasn’t literally living on rice and beans, but I made sure my meals were inexpensive. I didn’t eat out, and I didn’t splurge on groceries. This approach saved me hundreds of dollars each month for my loans instead. It wasn’t glamorous, but it was effective.

Housing is often one of people’s most significant expenses, so I found a creative way to cut that cost. I moved in with my sister and rented an extra room in her house. She gave me a family discount on rent (thanks, sis!), which significantly reduced my monthly living costs. Without this arrangement, paying off my loans as quickly as I did wouldn’t have been possible. If you have family or friends willing to help, finding a way to cut your housing costs is one of the most impactful moves you can make when trying to pay down debt quickly.

Another key to my rapid loan payoff was that I didn’t contribute to retirement or save an emergency fund during this time. I know that goes against traditional personal finance advice, but at the time, my focus was solely on eliminating my debt. I could direct every dollar towards my student loans by not putting money into retirement accounts or a larger emergency fund. While this was a short-term sacrifice, I knew I could shift my focus to saving and investing for the future once the loans were gone.

Each part of my strategy—working multiple jobs, reducing living expenses, using my whole life insurance policy, and being hyper-focused on debt reduction—allowed me to achieve a seemingly impossible goal in just 18 months. Was it easy? No. Would I recommend all of these strategies to everyone? Definitely not. But if you’re in a position where paying off debt is your top priority, a creative and aggressive approach can help you get there faster.

C - Conclusion: By combining extra income, creative financial moves, and extreme expense-cutting, I paid off $50,000 in student loans in 18 months. That debt-free feeling was magnificent.

Personal Finance Articles 💰

• Budgeting… ugh! Here are some tips for you to consider

• Saving for the future is important, but you shouldn’t neglect the present

• Is the FIRE Movement all it’s really made out to be?

• How does my employer’s matching contribution impact IRS contribution limits?

• Some student loan relief expires at the end of September

Something I’ve Learned

One of the most useful things I’ve learned recently is how a dependent care flexible spending account (FSA) can save families serious money on childcare costs. A dependent FSA allows you to set aside pre-tax dollars, which means the money you contribute is not taxed (not today, Uncle Sam!). A dependent FSA is helpful if you pay for daycare, after-school care, or even summer camps for kids under 13. You are able to reduce your taxable income and then use that pre-tax money to cover necessary expenses. Depending on your tax bracket, the savings can be significant, and many employers offer this benefit as part of their compensation package. Just be mindful of the “use it or lose it” rule—whatever you don’t spend by the end of the plan year won’t roll over.

Quote of the Reflection

Thanks for reading! I’ll see you soon!

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