Time do do some serious damage…

When I started this getting out of debt journey my first focus was getting rid of the bad debt, I paid off my credit-card, saved up a mini-emergency fund and over the past few months I started focusing on saving more and getting rid of my student loan.

After reaching $500 in my mini-emergency fund last November I decided to keep the ball rolling on the savings. Saving is addictive and I’ve begun to make it an automated process by having amounts withdrawn from my account automatically on the day I get my pay. I’ve realized this week however that my attention is now shifting from continuing to save to paying off the Student loan and perhaps it makes more sense for me to start dumping even more money on my student loan.

Serious coinage - source below

Both methods (savings vs debt repayment) will get me to my goal but I’m getting a real kick out of seeing my student loan balance drop at the moment so I’m going to take advantage of that building motivation. I know I’m constantly changing my mind on what I’m doing with my money next but hey, that’s why this is a journey! I’m also a person who can not do something unless their heart is in it 200% which is why I was having some difficulty getting real aggressive about that student loan debt, I just couldn`t get in to it ykwim?

I had been stuffing money in multiple savings account designated for a trip, an emergency fund and miscellaneous  expenses. My emergency fund now sits at $1000 and I will continue contributing about $50 a month to it to reach my year-end goal of $1,500. I am however going to empty out all my other savings to dump them straight on the student loan.

Why am I doing all of this? After thinking about this whole issue a bit more I realized a few things; my student loan is actually a Student Line of Credit (SLOC) that is not due to be repaid until about a year after I finish my degree (whenever that will be) until them I am only responsible to pay the interest and I can pay it off and use it as much as I wish. The interest rate on the SLOC currently sits at 4% for withdrawals and purchases. Not such a bad deal compared to government student loans at 8%+ interest… and since my savings only make me 2% right now it’s costing me money NOT to put the money on my SLOC.

By funneling the majority of my potential future savings into the SLOC I should be able to pay off about $800 – $1000 per month. (Maybe more? I’ll try!) I had been planning on savings of about $500 and paying down the SLOC about $500. Combining them only makes sense. This should also save me a few bucks of interest over the course of this year. The best thing about this plan is that if I find I need the funds back, I always have my emergency fund and the SLOC is open, so I could just take the money back if I absolutely needed it.

Today after withdrawing a portion of my savings and dumping whatever I had left in my checking account on the SLOC  I was able to decrease my Student Loan balance by almost $1,500. Woohoo! I’ll adjust my progress bars on the side in the next day or so, after all the transfers go through at the bank, and I’m excited to start making bigger payments.

Jeff commented on my last post that some people might think it’s a little silly that I spent $62 on theatre tickets last month while I’m still in this debt-battle. As I wrote today, I won’t do something unless my heart is 200% in it. If I were to take ALL the fun out of my life I’d probably a) become depressed – this is Canada, it’s winter and it’s dark all the time + I work late at night so I sleep until 11AM most days. I get little daylight and its hard to keep my spirits up because of that. I need my fun! and b) come on! Live a little! =) It’s totally fine by me to be done with my debt a few months later if it means I get to have some fun along the way.

What do you think? – Of course the key here is for me NOT to rack the balance on the SLOC up again while I’m paying it off. Then this would all be futile and I’d lose my savings. You guys can keep me on track though right?!

Ps: IMG source here.

Published by Renée

I write about my life, travel and my financial up and downs on my blog, Nickel By Nickel, while contradicting myself daily. ;)

4 thoughts on “Time do do some serious damage…

  1. Good luck with your sloc – don’t worry about what others say about your spending, like I mentioned last time – Just buy what makes you happy – You’ll get out of debt soon enough (or save more money for vacations) as long as you keep focused on that.

    It’s also really nice to watch those loan balances drop like that.


  2. I think this is a great plan Andrea. It feels great to see that student loan balance decrease, and I think it helps a lot when you focus too. When you have one overarching goal you can really make some progress. Paying off the student loan, at least for me, wasn’t as much about saving the interest in the short-term, as it was for the peace of mind. I sold $10k of investments and used it to pay off a chunk of my debt and it felt absolutely amazing.

    Also, I don’t think spending $60 at the movies is bad at all. For similar reasoning to what you said, you can’t suck all the fun out of life.


  3. You should 100% buy what makes you happy, that’s the whole point of going to school and working! 🙂

    I agree that you need to take a very close look at what is paying/charing more interest. As you said, if your SLOC is at 4% and your savings at 2%, then you are still netting -2%.

    In contrast, if your savings were making 8% then I would suggest only making the minimum payments on your SLOC until you were capable of making large lump sums.

    It’s like having a mortgage at 3%, why over contribute if your investments can make 2-3x as much?

    Aggressive repayment is only truly necessary when you are netting less than 0% IMHO. And right now, rates are super cheap in Canada.

    I hope you enjoyed the theater!!


  4. Way to go in paying down your debt. Student debt can never be discharged, so it makes sense to pay it off as quickly as possible!


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