Happy New Year everybody—I’m feeling rejuvenated after my vacation and ready to take on a whole new set of challenges for 2019. Hope you’re feeling the same way.
I also reached a big, BIG milestone, as implied by the title: last month, after making my first wire transfer of money back from Japan, I paid off the very last $3,400 of my very last student loan. At 5.8%, that final loan was costing me $16 bucks a month in interest, but moreso than the monthly savings is knowing that I’m now COMPLETELY FREE OF INTEREST-ACCUMULATING DEBT, which just feels all kinds of awesome.
It was hard to describe the feeling of pure freedom I experienced when I clicked Send on that last payment, like now that my loans were gone I’d finally be able to do more of the things I wanted to do. I’ve been paying off student loans since I was 22, when I was shelling out a disconcerting $647 bucks every month (!!) of the $65,000 I borrowed to go to Bennington, plus extra principle so I could get rid of the higher-interest ones faster. Literally every major financial decision I’ve made in the past eleven years—whether to take certain jobs and leave others, where to live and how much to pay in rent, what trips to take and which luxuries to avoid—has been based on how much student loan debt I had at the time, and now, at long last, I can consider my other priorities.
I’ll freely admit that I felt a little overwhelmed at first—paying off those loans was one of my biggest goals for a LONG time, and a big part of where I focused my financial energy. Without an easy, convenient goal like getting out of debt, for a few days I actually felt lost, like I wasn’t sure which other direction to start moving in. It’s like that feeling you get when you’ve been planning something for so long, and when it finally happens you feel empty because you don’t have anything else to plan for.
That feeling, though, was short-lived, because almost immediately I remembered I’ve got a novel to finish and secret projects to work on and multiple books to hype and a future to plan for and Japanese to study, so there’s no shortage of things for me to be devoting myself to.
Also, I’m not completely out of the debt swamp yet….
Wait, What Was That Asterisk You Mentioned in the Title??
So the part of my loans that accumulates interest (that annoying $16 a month) is paid off, but I’ve still got some student loan money unaccounted for.
Three or so years ago I started making charges on a 0% credit card—you know, one of those promotions you get in the mail that most people just throw away but I always look at just to see if it’s worthwhile. This particular card was: no interest payments for over a year, a $200 bonus if I spent a certain amount, and a temporary 5% point reward system that netted me an additional $100. (Quick Disclaimer: while these kinds of credit card offers can be pretty sweet, not all of them are created equal, and sorting out the worthwhile ones for your current situation involves a lot of careful spending and payment tracking if you take the plunge, so be careful!)
I pocketed a cool $300+ in cash rewards but also kept a $3,500 balance on the card while it was 0%—my logic being that I had the money in my savings account to pay it off and could earn a little extra off the interest while I waited for the 0% promotion to run out. Being able to keep the extra money in the bank also provided me a decent safety net in case my life took an unexpected financial turn—a definite possibility around the time I left my greenhouse job and moved out of Nebraska (the subject of one of my very first blog entries).
By the time the 0% ran out, though, I had an idea: instead of playing it safe and just paying off the card, what if I transferred the balance to another 0% card and used the money I had in the bank to pay off my higher-interest debt—i.e., my other student loans? This is the same strategy as sorting all your debts by interest rate and paying off the ones with the highest interest first to save some mad long-term money (as this article explains), except in my case the lower-interest debt is 0% and the student loan interest was, well, higher than 0%.
I’d also found myself at a sweet spot where, if I made the balance transfer, I’d be able to COMPLETELY get rid of one of my student loans while still keeping some emergency cash. In addition to saving me some mad interest money over the long run, the payoff also gave me an extra cushion of $271 a month I wouldn’t have to pay out on my bill—again, earning me more financial freedom every month.
Transferring credit balances comes with a fee, though: usually 3%, but I was lucky enough to snag an offer for 2% on one of my existing cards (again, check your mail!) that saved me some more cash. It cost me about $70 to transfer the balance, which was a lot less than the $140+ I’d be spending on student loan interest by not making the transfer. And just like that, I was a little closer to being debt free.
I repeated this process again last spring, except that time I’d made more 0% charges on a different card and had to transfer balances twice, for a total of $5,000 on two different cards. Again, I put the money I had in the bank toward my student loan balance, and saved money in the long run because the credit card transfer fees were lower than the interest payments. Being that much closer to having zero payments per month was also a BIG confidence boost.
I also felt really confident making these transfers because I’d already been accepted for the job in Japan and knew with the money I’d be making there I’d easily be able to pay off the $5,000 by the time the 0% rate ran out—especially once the last of my student loan debt was gone. That’s the plan for now: not to make any more balance transfers, and to use the next few months of steady savings to knock out the 0% balance by the time the rate runs out. (Luckily I’ve got a pretty sweet financial setup in Japan, so this shouldn’t be a problem.)
Again, another disclaimer: I DEFINITELY DON’T RECOMMEND THE 0% CREDIT CARD GAME TO EVERYONE. Balancing the numbers can be tricky, and you’ve got to stick to a careful financial plan if you want to pay that balance off before time runs out. Looking back, though, I felt confident moving my money to the 0% cards for a few reasons:
- I still had a decent amount of money in the bank if things went sour—not enough to cover the whole debt, but enough to cover some
- I knew I’d be making enough money at the Japan job to pay off the debt with careful saving
- I felt confident in my ability to keep a budget and focus on the goal of paying the cards off
So, that’s where I stand now—my student loans are gone, and I’m currently making total payments of $52 on two 0% credit cards that don’t charge any interest as long as I pay them off by next summer. I feel more confident for being student loan-free for the first time in 11 years, and dealing with the final two 0% cards just feels like a monthly money-moving game now.
I also feel freer to focus not only on other financial goals (building a bigger savings cushion, plus actually putting money away for retirement—WHAT???) but more importantly, freer to focus on my writing and creative goals without debt constantly influencing my decisions like it’s been since before I even left school. Without debt, I feel more confident to, say, take a lower-income job that doesn’t suck up all my free time, turn down side hustles I’m not interested in, or even straight-up take more time off to write like I did last spring—meaning my options are more open for the future.
And that all feels pretty damned good.
Final Takeaway: If I Can Do It, You Can Too
I hope anyone who’s made it to the end of this has been inspired to tackle their own debt problems—or even picked up some ideas on how to play the 0% credit card game. Being debt-free isn’t the most important goal in the world for a creative person, but it was important to me in making my long-term plans and keeping my head clear. With 2019 upon us, it’s time to take on other goals, and my finances are going to look a little cleaner than they did in 2018.
It’s a new year filled with new possibilities—so how about resolving to keep in touch?
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