“I went into teaching for the money,” said no teacher ever. It’s no secret that teachers’ pay does not come close to reflecting the amount of work that teachers do and the impact that teachers make. Recently, neaToday and The Washington Post ran articles describing the Teacher Pay Penalty. In a nutshell, it’s the idea that teachers suffer a loss of income when they choose to go into teaching instead of alternate professions. In spite of this penalty, I’ve somehow managed to become debt-free. Here’s a glimpse into my debt-free journey.
After the car that I’d had since undergrad got broken into, and the thieves did enough damage to the ignition that would have cost more to fix than a down payment, I decided to make a purchase. I got a car, and five years later I was done making payments. Of course about four years into making those payments, I started getting calls from the dealership to trade in my car for a new one. Nope! I was so close to the finish line I could taste it. In fact, some months I made extra payments just so I could be done faster. The calls continued. Later I was able to use the excuse that I was working on buying a house and didn’t want to jeopardize my debt-to-income ratio, so they left me alone (for a few months). Now, I’ve just stopped answering and sneak in and out of the dealership when I go in for maintenance. I’ll be driving this car until the wheels fall off…which I hope doesn’t happen anytime soon since I recently had to buy four new tires #FinancialWomp
Another culprit that keeps people from being debt-free…credit cards! If you’ve read previous posts like Back to School without Breaking the Bank, then you already know I’m frugal. But, I do “splurge” from time to time, mainly on travel. Trips can add up! I save money where I can, doing tons of research before purchasing tickets, finding promo codes for hotels, limiting my packing to a carry-on…still, it adds up. All that to say some months my credit card statement can be a bit disrespectful. Nonetheless, I make it a goal to pay off the balance each and every month because interest rates are even more disrespectful. Speaking of interest…let’s talk about student loans.
Oh, student loans. Again, interest rates are rude! Before I was completely done with Sallie Mae, Navient, whatever you want to call her, my balance was way more than the original principal, courtesy of those interest rates. The kicker was when I realized that I was accruing nearly one dollar a day in interest; that’s absurd! As a teacher, I was eligible for loan forgiveness after five years of teaching – $5,000 for elementary teachers, $17,500 for high school and special education teachers. I won’t begin to share my thoughts about the difference. Anyway, I was grateful for the $5,000 because it made a difference.
Now, something I wish I’d done differently…instead of deferring payments for those first five years, I should have applied payments to the principal. But hindsight is 20-20. So, after the loan forgiveness, I was still left staring at a hefty amount. I began to make aggressive payments because I was determined to be debt-free by 30. I didn’t make the deadline I’d set for myself, but a few months later was still a nice belated birthday present. Nothing like seeing those words, “PAID IN FULL.”
Now I’m left with a mortgage, which is seen as good debt, so I’m fine with that. Be on the lookout for a future post about how I managed to buy a house on a teacher’s salary (something I never even imagined, or thought possible).
All of this to say, being debt free is possible. Below, you’ll find a glimpse of how my money was being allocated each month.
House – 30% of my monthly income
Car – 10% of my monthly income
Credit Cards – 20%, sometimes 30% if I had an extra fun month with a trip or frequented happy hours. So yea, let’s go ahead and say 30%. Though I’m proud to say this month it’s closer to 5%, woot woot! I also recognize that we’re only halfway through the month, so we’ll see what happens.
Student Loans – 5% to make it a friendly number, though it was really 6%
Food, utilities, cable (you know, basic things I need to survive) – 15%. Cable constitutes nearly a third of this category, yikes! One day I’ll be strong enough to cut the cord. Any tips to help in that department?
Savings – 10% Now that I’m out of debt, that number should increase. I’m hoping to start a travel fund and contribute to my regular savings, we shall see…
So, that’s my budget in a nutshell. I’m no expert, but I’d suggest tackling the debt with the highest interest rate first. If that’s too daunting, knock out the debt with the lowest balance. It’ll free up some money, and it might make you feel like a weight has been lifted off your shoulders. Any other tips to become debt-free? And seriously, any suggestions to cut off cable?