Nearly 42% of Millennials currently have student loans and borrowers between 25 and 34 years of age currently owe a total of $497.6 billion.* This increasing debt is making it increasingly harder for people to live the life that was once afforded to their parents. From buying homes, to buying cars, getting married, having kids and even taking vacations, it is becoming more difficult to afford anything other than getting an apartment and barely paying off your debt.
I received my Masters in 2018 with over $40,000 in student loans and then I had to move to a city where the average rent was $1,100/month and also had to get a new car because my old one broke down. Although, I accepted a job that was relatively well paying, I still felt financially burdened by all of my new financial responsibilities. My biggest goal was to pay off all my debt as quickly as possible. Along with paying my debt, I also wanted to use my money to travel on the side. So I had to find a way to travel while still maintaining my financial goals.
Here are some of the steps I took to travel and still pay off my student loans. These few things have helped me pay off $25,000 of my student loans and $5,000 of credit card debt in the last year alone, while also traveling to over 7 countries, and countless U.S. states.
Before I continue, I have to acknowledge some privileges I have that made this possible:
- I have a good paying job
- I lived with family for a couple of months before getting my own place, but I will say I actually payed more towards my loans when I lived alone because I was better at budgeting when I got more financial responsibilities.
There might be some privileges that you have as well, for instance if you have the opportunity to live with family, then do so. Or if you can get a roommate then do it. Whatever you can do to save money that is legal and safe go ahead and do that.
Step 1 Create a budget
The first thing I did was create a budget. This budget included my monthly income and identified every single bill I pay monthly. I also had a sheet that I used to calculate the total amount of interest that my student loans will accrue every month and how much I would pay toward my loans monthly. It allowed me to allocate some money for entertainment and traveling. From this, I could see how much I have paid so far, how much I have left and how soon I could finish paying off my loans. Having this excel sheet made me so excited to see my progress and to know that I would be done paying the loans in no time.
I have included the excel sheet that I used to plan my student loans and my budget in this post for free download. The first sheet is a simple budget. The second sheet helps you plan out paying off your loans by giving you the amount of money you need to pay monthly. The final sheet allows you to be more realistic and enter how much you actually paid every month. There are a lot of excel sheets online if this one does not work.
Step 2 Eliminate any unnecessary expenses from your budget
We all have certain things that we spend more money on than we need to; for me that thing is my appearance, specifically my hair. I like changing up my hairstyle a lot so I wear wigs and I like really expensive wigs, but that was one thing I had to eliminate from my budget or at least reduce. So before I embarked on this journey to financial freedom, I bought an everyday wig that would last me a really long time and I also found an affordable hairstyle that I could do myself. This helped me save a lot of money and redirect my funds towards traveling. Your thing might different, for you it may be nails, video games, eating out or something else. Whatever it might be, if it is not a necessity, then find a way to eliminate it from your expenses and direct the funds your funds towards traveling.
Step 3 Create an Emergency Fund
Before you start paying your student loans or credit card and even start global trotting, it would be important to start an emergency fund that has money that will cover at least 3 months of expenses, if not more. I had at least 6 months worth of funds saved up. Your expenses should include all of your bills, food and also enough money for you to be able to handle a random emergency like your car breaking down, medical expenses, etc. It is important to have enough money to handle almost anything that comes your way. I stored my emergency fund in a high yield savings account. I went with Ally Bank which at the time had an APY (Annual Percentage Yield). of 1.90%, their rate has since gone down to 1.60%, but there are many more other high yield savings accounts out there. To ensure I was able to put away enough money, I scheduled monthly deposits into my savings account. With Ally, they add the interest you accrue every month, so each month I was able to make $12 just by keeping my money in my savings account. Getting $12 X 12 months is $144, and that is $144 of free money I could use towards my traveling.
Here is a list of other online high APY savings accounts:
Goldman Sachs Bank USA Online Savings
CIBC Bank USA Agility™ Savings
CIT Bank Savings Builder
PurePoint® Financial Online Savings
Step 4 Start attacking your loans by overpaying and making frequent payments
Once I had an emergency fund, I began attacking my loans. I started with my smallest loan that had the highest interest, because the high interest makes it . My main goal was to overpay on the minimum monthly payment. Just paying the minimum balance on your loans will only lead you to paying the interest and not actually impact the initial balance that you borrowed. My goal every month was to pay 5 times the amount of my minimum payment. You don’t have to pay that much but you can try your best to pay above the minimum payment every month and whenever you have any extra funds lying around then use them to pay your loans. For instance, you can use your tax refund to pay your student loans. Not only does this reduce your compound interest drastically, but it also lets you direct all the money you would have paid towards your interest to your travel fund. It is important to make frequent payments even within the same month. When you make small payments through out a month, then you help to reduce the amount of compounded interest that is added to your loan that month. This reduction in the amount of compound interest, leaves you with more money that you can use for traveling.
Step 5 Start a Travel Fund
Having a travel fund is really important, because you won’t have to worry so much about touching your savings for your trips. Having this money in a high yield savings or checking account might also be helpful, since your money will appreciate over time. You can put away a small amount every month like maybe $10 – $25. It would be helpful to create a goal of how much money you want to have put away by a specific date, this will help stay on track. If you feel like it is too difficult to actually put the money aside yourself there are different apps out there that can help you put money away. Apps like digit and acorns will help you strategically invest your spare change or put it away in a savings account.
Step 6 Get a Side Hustle
Side Hustles are really helpful when you need some extra cash. It is a great way to make money in your free time after work. I have done quite a few side hustles, from ride sharing, to online teaching, to grocery delivery, I have done it all. The best sides hustles are the ones that don’t require a specific number of hours every week. You can add the money you make from your side hustles to your travel fund and watch it appreciate over time. Below is a list of a few side hustles:
Step 7 Create a Travel Plan
Once you have addressed step 1-6, you will need to create a travel plan. First identify the places that are affordable for you to fly, train or drive to from the city you live in. Google Flights makes identifying these locations easy when it comes to flights. It not only allows you to see the cheapest locations you can fly to but it tells you the cheapest time within a 6 month period to fly there. You can also book and compare hotels on the site. Once you have identified 2-3 affordable locations that you are interested in, you should document which location you would like to visit first and when you will have enough funds in your travel fund to do so. This location does not have to be different country, it can be a neighboring city, or state, there are a lot of fun filled tourist destinations in the United States.
Step 8 Travel, but start small
Once you have enough money in your travel fund and your travel plan is created, then you can start globe trotting or at least state hoping. When you first start, you do not have to visit 12 countries in one year but you can have one or two meaningful and affordable trips that year. The more you attack your debt, the more money you will have to dedicate to more trips. Remember, Rome was not built in a day.
Remember that what works for me might not work for you but I hope these tips can be a starting point for you to tackle your debt and travel more.