My Personal Finance Decluttering – Bye Bye Student Loan
Following my recent mortgage refinance, I also bit my teeth and paid off the student loan debt that I carried since I graduated in 2006.
I had to “bite my teeth” because of the amount of savings I’m giving up to get rid of these debt, especially on top of the chunk of saving I put away in the refinance process. My rationale…
For the longest time, because the student loan is sitting at a low 3.5% rate, I considered it as cheap money and was going to pay it down slowly over the year.
However, even as I was paying it slowly monthly, I was putting in 20-30 bucks extra each payment to help dwindle the loan amount down faster. As a result, I saw the amount sitting around $3000.
There is a story about a philosophy teacher that talks about how we can see our life as a bottle with the important things as large stone pieces we put in it and the trivial stuff as small pieces of sand.
Because the loan is sitting at just $3000, and by principle, it’s “cheap money” and money is better in your own pocket… I decided that keeping this loan is like having more pieces of sand than necessary. For my peace of mind and not having to keep track of it anymore, I made the jump to pay it off.
As a result, my only real loan left is my mortgage (because I’m paying off my credit cards monthly). Perhaps I’m simply risk-averse or financially conservative, but in this day and age where employment is not quite guaranteed and work environment unstable, it is important to reduce debt to provide yourself the flexibility and option to consider other opportunities. In short, the less fixed cost in your cash flow, the better.
Plus, the less things the mind has to keep track of, the less chance of making mistakes that may cost money. Therefore, being thoughtful in minimizing debt and reduce debt cannot be stressed enough because of how easily costs can snowball!
At any rate, I can forget making that student loan payment each month now, and that gives me more space in the mind… which by itself, is priceless.
Originally posted 2013-01-04 23:42:09. Republished by Blog Post Promoter