The 4 steps I took towards achieving financial independence
After recently learning that the total U.S. student loan debt has surpassed $1.5 trillion dollars, I decided to write about what I have done to take control of my financial situation. So many people are locked into debt that snowballs and struggle to make ends meet on their student loan, car, and/or home payments. Although I too was struggling, I decided to take control and share my story.
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Before I chose where I was going to college, my parents — for whom I was grateful that they helped pay for the bulk of my university education — told me that choosing to attend university came with one responsibility: I needed to ‘have some skin in the game.’ In other words, I had to take out small, federal loans in my name, each year, which I would start to pay off after graduating college.
Fast forwarding to my senior year of college, with almost all of my schooling paid for in full and a few, small federal loans covering the costs each academic year, an unexpected financial circumstance popped up, requiring me to take out a private loan for my last semester. Not fazed by the situation, I swiftly researched student loans that didn’t require a co-signer. While I could not take out a federal loan for various reasons, I found a private one with an okay interest rate, and secured a loan for my final semester.
Once I graduated, I had accumulated just under 1 full year of student debt in total (equivalent in 2016–2017 terms for a private university). While I was excited to begin working as a salaried employee, I knew I was going to incur additional expenses, on top of those tied to paying off my loans. From commuting to having to buying nicer clothes for work, and putting some money aside for social activities, I established the following financial goals to help ensure that I could take care of what I needed to on a daily basis and pay off my student debt in a timely manner:
1. Pay off my private loan in less than 18 months.
2. Pay off my federal loans in the following 12 months.
To hit those aforementioned goals with the objective of being debt-free, I did the following:
1. I evaluated all my debt based on accumulated interest and interest rates; then, I decided which debt I wanted to tackle first. Debt comes in many forms. My debt is primarily comprised of student loans. A very small amount was on credit cards from additional expenses incurred towards the end of my time in college.
Because credit cards generally have a higher interest rate than student loans, first, I started paying off my two credit cards to make sure that I could pay off the debt that could snowball out of control the worst. (Always pay off credit cards with the highest interest rate first, to avoid paying the credit card lender extra money!) In tandem, I continued to make the minimum student loan payments to avoid defaulting on said loans.
2. Next, I analyzed my student loans and came up with a way to pay these off. Once I aggressively paid off my credit cards after about two months, I then turned my attention to my student loans. I took out four federal student loans, one during academic year, as well as one private loan that I used to help pay for my final semester, in full. Of my student loans, it was most logical for me to start paying off the private student loan, of the five I had, because it had the highest interest rate.
Everyone who takes out student loans has different priorities to pay them off based on different situations one may be in post-graduation. I highly recommend reading this article, written by one of my friends from college who discusses different types of loans in more detail, budgeting and paying them off loans based on different personal finance goals.
Based on my friend’s article, I fall into situation #3; I want to take advantage of paying off my loans more quickly, especially because I am taking advantage of living at home for the time being, where I don’t have to pay rent. (A big thanks to the ‘rents on that! Get the pun?)
3. Then, I looked into ways to better manage the remaining student debt. When students take out multiple loans, particularly when they come from multiple providers, it can be difficult keeping track to pay off each one. Loans may have differing balances and interest rates, just like owning multiple credit cards. The only difference is that loans usually have a lower interest rates but may have higher monthly minimum payments. This is where consolidation helps better manage your loans.
In addition, with my knowledge about refinancing based on people whom I know have been able to refinance mortgages and others loans in the past, I decided to look into this for my student loans. Upon research, I came across a company that made refinancing both fun and more importantly, valuable: SoFi.
SoFi, which stands for “Social Finance,” is a new finance company (relative to the big banks like JP Morgan or Citi, among others) that focuses on empowering their customers, quite literally, through its powerful social media community. I actually had learned of the name SoFi from one of my college professors who invested in the company.
Whether it be refinancing student loans, getting a personal loan for a home renovation project, saving for retirement, or something else, their product offerings in tandem with their customer service is incredible; however, what I find most valuable from SoFi are the incredible benefits.
In my opinion, SoFi provides a first-class experience for the products they offer and their customer service. Customers who have SoFi’s products are automatically eligible for complimentary career services and financial advisors, unemployment protection, discounts on additional loans, community events (many of which are free) and so much more. After learning about all that SoFi could offer me…
4. I refinanced my student loans through SoFi. I fell in love the brand so much that I also applied to become a SoFi ambassador once I was a SoFi member, and was selected!
I love SoFi because they are more than a company focused on its bottom line; they care about their members and want to see them succeed and not get bogged down with accumulating interest and more debt. If you have questions about my experience with SoFi thus far, feel free to send me a message on LinkedIn. As an ambassador, I want to emulate the positivity that SoFi spreads and empower others to take control of their financial situations: good, bad or ugly.
If this article makes you feel ready to take charge of your financial situation for the better, click here to explore the opportunities and begin your awesome experience with SoFi!
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Disclaimer: Reading this article does not guarantee future outcomes, as I am not a certified financial advisor.
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