Graduated Learning: Life after College

I got my degree, I got a job…now what?

My interest rate epiphany September 2, 2008

Okay, it’s really not that impressive of a revelation.  And many people have probably already realized this.  But it required the help of my boyfriend telling me to take a step back and look at my finances before I could realize this for myself.

I was struggling with the idea of going into even more debt to have a car.  And I kept saying I just wanted to pay off the car as soon as possible.  But as I mentioned before, my interest rate is actually lowest for the car out of all my debts.  And that’s when Aaron pointed something out:

Once you have the debt, it doesn’t matter if it’s “good debt” or “bad debt”.  You just develop a plan and pay it down.

It’s really that easy.  Sure, you should try not to incur more debts.  And of course, if there are tax or other benefits involved in paying off certain loans, you should bring that into the equation (which might make some debts slightly “better”).   But the typical good debts, like student loans and mortgages, are more often allowed in the personal finance world, compared to consumer debts.  But you can’t keep kicking yourself for making that decision; regretting a choice wont make the consequences go away.  But that’s how I was looking at the car debt; it was bad debt that I needed to get rid of ASAP.  Which really isn’t the financially smart thing to do.

Some people prefer following a debt snowball, starting by paying off the smallest debt first.  It may not be the best choice, mathematically speaking, but if you will actually do it, it’s a heck of a lot better than saying you’ll pay the highest interest rate debt first, but not doing it.

If you’re able to look at the debt in a purely logical way, and not in an emotional way, you can create a plan, and stick to it.  So that’s the plan for me.  I’m going to pay the amounts due each month (of course) and figure out how much extra money I have in my budget when considering monthly expenses, including putting money into savings and retirement investments.  And whatever that “excess” is, I’m going to pay that towards the student loans with the highest interest rate.

I think this is where the “personal” comes in with personal finance.  Sometimes you need to bring your feelings into the money equation, because they will inevitably affect you.  But I believe that I can look at the finance just numbers that need to go in a certain direction.  This may not work.  I think I’ll need someone to hold me accountable on this.  Make sure I actually sit down and write out my budget, rather than spend and then track the spending afterward.

I think I tend to make a lot of to do lists.  And sometimes I don’t do everything on the lists.  But I think that paying off my debts really needs to be something that takes top priority.  Which means I need to do the budget, and actually make the phone call to the bank where my student loans are from to find out if I can consolidate my loans at the low rate that they currently are (thanks to the low fed rate).  It really doesn’t take much time at all to do something like that.  But I just need to do it.

And like I said before, it’s better to do the thing that works, rather than the “best” thing if it doesn’t work.  So we’ll see if this plan works.

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9 Responses to “My interest rate epiphany”

  1. Great post! A lot of what you say I totally agree with. Well done! Recognising the problem exists is the first step. The second step is to do something about it. I’ve written a book on the subject and it’s available free. ezinearticles.com have dubbed me an ‘expert’ on my Debt Consolidation article.
    Best wishes. Neville (UK)
    PS. There’s another side of the coin that you don’t seem to have realised – increasing income!

  2. Kendall Says:

    Yeah! I’m on twitter. It’s fun, but it’s more fun if you know more people on it. Are you on it?

  3. drcorner Says:

    Nice job. I agree, but personally I prefer to pay out the card completely before moving onto the next, that way the monthly bills slowly get reduced and eventually out-right removed.

  4. Stephanie Says:

    Thanks guys!

    Question for drcorner…what do you mean?

    My goal as well is to eventually have each bill outright removed…though I’m working down the debt with the highest interest rate to disappear first. Unfortunately, it’s also the highest amount of money that I’m going to be paying off, so it’ll take a while.

  5. drcorner Says:

    Hey Steph’ sorry for the confusion. Studying Personal Finance, I’m sure you know that there’s many ways with which you can pay-down debt. Some choose the low-high, high-low, spreading your money evenly across all debt by paying off only the monthly minimums, as well as many other methods.

    You prefer to tackle the biggest balances first, thus removing the highest monthly payments first. I prefer to pay off an entire cards balance first in the shortest amount of time, regardless of whether it’s the lowest or highest. That way I can more quickly remove the amount of separate monthly payments (a form of debt consolidation).

  6. As a student we should be wise about our loans because if we just take it for granted, we would just discover that we already have pile of problems to our loans. We should always be alert in securing our loans. There are lots of consolidators but not all of them can be trusted and we should be aware of those consolidators who are unethical. We should always be careful on what online loans or student loan to choose because not all of them are concern about the welfare of the costumers.

    Post Courtesy of Personal Money Store
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  7. High profile politicians, including Barack Obama, are seeking to limit the American peoples’ access to on-demand, short term financial assistance. Some cities and towns are trying to impose restrictions on where these legitimate businesses can set up shop. Even worse, several states, including Georgia and North Carolina, have successfully imposed all-out bans on the industry, with several more attempting to follow suit. Citizens all across the nation are seeking to have their voices heard by fighting legislation that would obliterate the payday loan industry nationwide; Obama, and other misinformed political officials, are pushing for a complete ban in the name of personal political gain, regardless of the hundreds of thousands of potential lost jobs in an already turbulent economy.

    Post Courtesy of Personal Money Store
    Professional Blogging Team
    Feed Back: 1-866-641-3406
    Home: http://personalmoneystore.com/NoFaxPaydayLoans.html
    Blog: http://personalmoneystore.com/moneyblog/

  8. I Know Debt Says:

    “You just develop a plan and pay it down.”

    Words to live by!

  9. ParisGirl111 Says:

    Yes, taking the first step and creating a plan is an excellent idea. I agree with Neville too. For a long time, I have tried to complete my plan with my existing income…to Turbo speed this plan though, you need an income increase…even if for short spurts of time.


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