How to Prioritize Paying off Student Loans

How do you prioritize it with maybe all the other goals you've had over the past several years, all the other goals that you have, now, how does paying off student loans fit into that picture? And that is what this episode is today.

format for our episodes. However, we're going to take a departure from that today because prioritization is one of the things that we feel we have enough to say without Google to run through our views fully, not just curated, but original thought on prioritization and how this fits in with looking at our student loans and maybe other financial goals that you have.

for you. But before we get into the good stuff, this episode is brought to you by even better Stuff, the Frugal Friend's Friend letter referral program. We need to give that a better name. Though, yeah, friend, we're workshopping that name. Basically, if you are one of our friends who gets the friend Letter every week. If you're not, go to Frugal friendspodcast dot com slash friend Letter three

times a week. We send freebies, we save money saving tips, we send excerpts from the book that we're writing so about prioritization, values based spending, all that stuff. And now we want to incentivize you to invite your friends to get the Friend Letter. So for every friend that you bring into the fold, you are going to get exclusive Frugal Friends merched that you cannot buy anywhere. You cannot buy this stuff, so we've got stickers.

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I get it. I would do that too. But if yeah, it won't go through. So definitely check the friend letter, start sharing your unique link, and start getting some fun frugal friends merch.

check out episode two forty five. A little bit of the info is outdated, but the gist of it is still relevant. That is our interview with Nika Booth at de Free Gonna Be And you should definitely just follow her on Instagram too at Debt Free Gonna Be because you will get all the PSLF info you will ever need from her. So that's if you're doing that. If you have private student loans, you've already been paying them off, but this is still for you. This is still for you.

And then federal student loans that you will not be able to get forgiven, especially for you. Yeah, so let's get into how to prioritize paying off student loans.

part of the episode. You know what we're talking about, Okay, but first prioritization, Jen, what is it? How would you define it?

it to financial goals. So what is a financial goal or practice that I can do now that I can focus on now that makes other financial goals or tasks easier or unnecessary later. And so some things that can make unnecessary is when you pay off high interest debt, you eliminate the need for higher incremental raises at your job. So everybody should be getting raises at their job and

going for an increase in income. But the longer you stick with your debt, the more you are required to get those races, the more those raises feel like a weight around your neck. And when you pay off high interest debt, and you eliminate those bills, then increases in income down the road are a gift, and you can

see them as such. Well, they're not a gift. You work for them, but you can be thankful for them much more than when you have these higher debt payments, so making them almost unnecessary but still very welcomed and very necessary to pursue. So something like that great but unnecessary.

to implement it. And I think it's because everything out there around us, maybe in the world, but even our smaller world is fighting for our attention, but we don't have unlimited capacity or energy for all of it all

the time. I like the definition that you gave Jen of deciding the level of importance or urgency, and it's important to be able to identify, well, everything might feel urgent, but what actually is of greatest urgency for me specifically, and when it comes to finances, this really pairs quite beautifully with this values based spending idea that we can value a lot of things, but prioritization is going to help us identify what is of greatest value and importance

because we're not going to be able to meet all of our values all of the time to the highest degree, and being able to understand various degrees of importance and identifying that rightly and accurately is going to make a big difference in our personal finances. There are dozens of fantastic financial goals, including paying off debt, but different seasons of our life are going to support different goals as we move through that and we are allowed to change

our minds and our seasons are able to change. But it's going to be this pairing of what season am I in right now?

Or am I finding a little bit more margin. Those types of things are also going to help inform prioritization values to what degree we can meet our different values and our different financial goals, even if they're all really great, what's going to be the best one to pursue right now?

pursue this financial goal. That is the actual excuse I used to not pay off my student loans, to not even try paying off my student loans when I was single. And so we use these excuses when really they are pivots. They are okay, so I can't pay off my debt as extremely as I see these people on YouTube or Instagram or TikTok. But that's not an excuse to say that I cannot try or I cannot focus on it for a time. And so maybe you're on a limited income and it's not student loans time, it's not time

for that prioritization. But maybe you have five thousand dollars in credit card debt and it is time for that. We often look at the big picture of our debt and we think it's way too much to try to pay off. If I have to pay off all of this and I have to be totally debt free, like I'm just not going to do it, when reality, it's sections right. It can be different debts get prioritized at

different times in different seasons, and that's totally okay. So the barriers that we are often faced with in prioritization it is simply just using our life circumstances, our life place, our season as an excuse to not do it. It can also be the inaccurate assessment of what's most important or what's going to help make something easier or unnecessary later. I think that question makes the top priority kind of

non important. We think we want to pick the one hundred percent best financial goal at any given time, right, And we're like, I don't know what I should be focusing on what's most important. It doesn't matter what's most important, It matters what you've decided will make something easier or unnecessary later in your life. And so maybe math wise there is a right answer, but it's your life and

math isn't always the right answer. So this question allows you to choose what you focus on, and there is no wrong answer when you use this kind of refining question.

aside and focus on what actually was most important. And I think this can happen with our finances too, Like, no, I'd rather just save up for this vacation that I want to take in a couple of months versus really going hard at my debt. I think we can apply it to a lot of different areas of life.

So paying off all of your debt without thinking of the bigger picture, paying off your house without thinking of the bigger picture of your finances and your income, investing sixty to eighty percent of your income without thinking of the bigger pictures. So there are these goals that other people have that they say, oh, everyone should do this, and we think, oh, gosh, maybe I should be doing this. No, we have to go through an assessment of our own lives to decide what is the focus. But when you

do that, you cannot focus on the wrong thing. Maybe you can reevaluate in a couple months and be like, oh, actually don't want to be focusing on this. I want to be focusing on this instead. And it doesn't mean those few months were a mistake. It means you needed them to gain the clarity to get to the better focus, and then a few other barriers are getting distracted. U Jill made a note on your mom's cleaning on TikTok, and I don't know what that means, but I'm sure they get distracted.

the dishwasher, it was still clean. So now I got to unload the dishwasher, and as I started to do that, I didn't have any room on my counter to put the clean dishes. So then I started to clean up the paperwork, and when I picked up the paperwork. I realized that there's a registration for my kids' school that I got to do, and when I went to go talk to my kid about it, I realized that their room was dirty, so I started putting that away, and then I realized that I got to make a phone call.

Like it just goes on and I can relate. I don't even have kids, But that getting distracted, I think can happen a lot, even with prioritization goal setting. It happens in the midst of our debt payoff plan or other financial goals. And it might not be because we're feeling scatter brained. We might get distracted because life circumstances are happening that interrupt as well, you name it. But getting distracted can be a barrier.

that you might even know what they are. So when we take on too much, then it makes focusing on our highest priority goal a lot harder. So not all the time are you able to delegate or give up this thing that should be on your plate but is not. But it should be something that you're aware of, and you're looking for opportunities to give up or delegate so that you can better focus on your goal, especially if some goals, so some higher priority goals are more i

would say intense than others. So if you have ten thousand dollars in credit card debt that has a twenty percent interest rate, that goal pursuing it is more intense than in five years when your highest goal is saving for retirement or saving for a new car. They can

be the highest priority goals at different times. But you are not going to work as feverishly to save for a new car as you are to pay off a debt that has twenty percent interest, and so you need to delegate differently depending on the intensity of your different goals.

So identify what they all are. I would recommend actually writing it down, and when it comes to finances, think about it all. What are the financial goals that you have even in life. They could be short term, mid term, long term goals. They can include student debt payoff. They could include other types of debt payoff as well. Maybe it's investing, what type of investing, saving how much saving,

what type of saving, sinking funds, long term emergency. Write it all down, then look through that list and determine the one on that list that by doing that one thing, accomplishing that goal might make others on the list easier or potentially even unnecessary going forward. That could include this is where we talk about paying down high interest debt first, because that's going to help catapult us in being able to pay down other debts or free up money for

other future goals. And then from there, once you identify what that one thing is that you really want to focus in on that's going to make the other things easier or unnecessary, you focus on that one thing to the exclusion of the other goals for a set amount of time. That doesn't mean that you're not valuing your

other goals. That doesn't mean that you won't pursue those hard for a time, but it is important to choose one at a time so that it actually gets a degree of concerted effort, so that you can actually see yourself chipping away at it, you see progress and hope full you accomplish it, and then can move on to

the next that are on the list. Again, one of the biggest barriers to seeing prioritizing go well is that getting distracted or trying to do too many at once, and we ineffectively then move through those goals because it's not getting undivided attention.

and our brains have capacity. All of our brains have a limit, a capacity, a limit for mental energy, and we use this to play with our brains, not against them, so that we can make more progress.

one of them. So interesting. But it is the practice of creating margin that you have enough room for extra student loan payments that is the true difficulty here, And it's why we talk about prioritization, because in the day to day, when you are making decisions should I spend on this, should I do this to earn extra money? All of these micro decisions we make throughout the day

will have an effect on our financial goals. And you could make one hundred micro decisions for ten different financial goals and make just a smidgeon a headway on all of them and see really no significant progress. Or you can focus on one and make a hunch undred micro decisions every day in the pursuing of that goal, and you will see progress much faster. Even if your progress is small, you'll see it faster, especially if your progress

has to be small. You have to practice this because that psychological win, those wins that you get are necessary for sticking with it. So student loan debt is it good, is it bad? Well, we don't think any debt is good or bad. I was actually just on Instagram the other day following one of like the healthy people that I follow the gym. I don't know how wellness influencers.

That sounds horrible. She's a personal trainer and she is saying, how we have told ourselves that there are good foods and bad foods, and that's how we get into this diet binge cycle because we eat the quote unquote bad food and then we binge and that's an unhealthy way to live. All food is neutral. Some has more as a higher nutritional density than others. Some is you know, near the floor, but some is really high. So that's the same way we look at debt. Debt is neutral.

And a mortgage can increase your net worth, or it can be a weight around your neck if you find that you don't actually want to be a homeowner, or if you bought too much house and or now house poor. So that's why we do not say there's good debt and bad debt. It is really person specific. So you have to decide where student loans are for you in that realm, and that's just how you should think about them.

That's not a strategy or anything, but that is a heart and mind move that you need to make to not view all debt is evil, yeah, but also not viewing people like some people love debt. We're not on either camp.

helpful decisions for myself. And with this concept in mind, with us looking at debt as neutral, clearing the guilt and shame from it. This helps us to look at it with clear glasses, and so it is important when we're looking at it in that way to understand the different types of debt that we may hold. Again, it's neutral, but they do come in different shapes and sizes. So referencing back to us prioritizing and writing down all of

our goals a part of that. If debt payoff is a part of that plan, you should write down what type of interest you have on those different debts that you want to pay off. You've got your high interest, your lower interest, and that's important to pay attention to. I did some simple math in preparation for this episode and looked up on a calculator a ten year simple interest loan of twenty five thousand dollars. So you've got this one loan over ten years twenty five thousand dollars.

Let's say you took out that loan at three percent interest rate. You are going to pay three thousand, nine hundred and sixty eight dollars and twenty two cents total interest paid over the life of that loan. Versus if you take out that same exact loan for ten years twenty five thousand dollars at a seven percent interest rate, you're going to pay nine thousand, eight hundred and thirty two dollars and fifty four cents over the life.

ding ding ding. That's something we can tell you. Yes, here's a blueprint other things, very values based and flexible in freedom, but pay off your higher interest debt first.

a car. If you go with a fifty one thousand dollars car, you're going to be paying almost twenty thousand dollars in interest.

spent half as much as normal minivans would cost. We made sure that we bought used, we got a really good deal, and we went to a dealership that didn't have superfluous fees. So we made intentional decisions to keep those loans low, so that we're not paying ten thousand more in interest than we need to be. So making this decisions like that is also what's going to help you have more margin to pay off your student loans

and your high interest loans and debt. So what do we mean by high interest, Well, obviously credit cards are highest. Typically you know payday loans up there too, hopefully nobody has those. But as a rule of thumb, this is just a rule of thumb, This isn't a rule. Anything over ten percent we now consider high interest. When interest rates were super super low, you may have heard us

say anything over five percent. If you've read anything by David Back, you've read anything over five percent payoff and we still think that that is a goal that is definitely something to pursue. But right now, anything over ten percent is first priority, and then you can reevaluate your goals and if you want to continue to focus on debt in some capacity, then shoot for that five percent range. So a lot of student loans, it will depend on

where your student loans are. Graduate loans, private graduate loans probably going to be up there for you undergrad. Federal might be below five percent. You may have gotten lucky but it's probably going to be above five percent nowadays, So that's kind of if you want a math, But ultimately, emotional considerations of your debt is going to be what we think is most important. How is it affecting you?

Forget the math. Do you feel like your debt is a weight and you want to be rid of it, pay it all off, get rid of it, simplify your finances, and just get all of that off. Do you not really care? Do you make a high enough income where these low debt payments and low interest rates aren't really affecting you? Leave it, Leave it and pursue investing in some other financial goals. The emotional consideration of your debt is really what we think is most important, and it's

however you interpret it. But we'll throw out the math for you just to so you can get a gauge of how the math maths. This is girl math, This is real girl math.

everything seems important is that nothing's really important. And that's also the problem of living in the extremes. It's an extreme way of life to think everything is important and you are required to do everything or to be everything, when really there is someplace in the middle. And then there's sometimes we think, oh, nothing is important, I don't want to do anything, and that's probably something that you should seek extra help on outside of finance. Yea, there

is a middle ground. It's in the radical middle. So if everything is important, investing, saving, paying off debt, buying a house, buying a car, saving for kids college, all of that is good, all of it is important. But what's the most important right now? What is the thing that I can do right now that is going to make other things easier or necessary in the future. So

another example of that is investing. If I invest a little bit now every month versus if I wait ten years and invest triple or quadruple that every month going forward, there are instances where I will never catch up. When you start small now and continue small throughout your life, you will and this isn't guaranteed because the stock market is vital, but based on the history of the stock market, you will end up with more money at retirement than

if you start later and invest more per month. So investing a little bit now is one of those things that you can do to make saving for retirement life later easier because in twenty years you're going to still be saving that three four hundred dollars a month versus the thy fifteen hundred you would have to save otherwise

to not even get to the same amount saved. You can save over one hundred thousand dollars by starting small now with investing, So that's another one of those examples used in the investing and with debt, if you are making small payments towards your debt just a little bit over into the principle versus doing nothing and staying in forbearance, while this student loan interest pops back up, you won't be able to catch up because student loans are not

a simple interest loan. The interest increases. So that's why we think that paying off debt is one of the most important things that you can do early in your financial journey. So do the math is one of the ways that you can see that not everything is important. Do that heart check, that headcheck, but really consider why you think everything seems important. Who's telling you everything's important? Is it anxiety? Is it your family? Is it influencers

on social media? Because everything is not important right now? There are certain goals that you have that are more important than others. You have to identify those.

the next thing on the list. We're going to have so much more success that way versus trying to collect it all, hold it all, do it all at the same time. And this then is where we can also integrate the concept of boundaries, which we're all learning about regularly. All of the time with relationships and money and you name it. But yes, boundaries also have a place here where we can place boundaries on ourselves as we relate

to the world around us, within our finances. And I use boundaries in a very flexible, freedom oriented kind of way. Boundaries in a way of it creates an idea of where's their space to play within these fences, not a restrictive kind of manner. And so when we have a set plan, when we've done the work of I've identified and listed out everything that is important to me, then I did some of the soul searching of what is most valuable for me right now or will make my

life easier in the future. We're then more easily able to say no to the other things or not right now. And that's boundaries, that's boundaries one oh one, because then we're not so overwhelmed by even the social media influencers who are saying you need to be putting eighty percent of your income towards your retirement savings and investing. When we're able to say, oh, I see you, very glad

that you're doing that. Actually, I have a plan for my finances and it's to pay down my high interest debt, or you name it. And it's easier to say no to this person telling you to be doing something when you already know I've got a plan in place, I understand my values, my financial goals are based around that, my spending is based around that, and I am living within these boundaries that I have set. It makes everything else so much easier to say no to mm hmm.

doesn't mean they're not competing for your attention. So you really have to be aware and draw boundaries so that you can keep focused on that one goal at a time and keep it your highest priority, especially if it's a debt payoff, because like I said earlier, that's a more intense, more urgent, maybe not intense, but a more urgent priority goal than something else down the road may be.

way I was able to a year ago. Or do I need to put this on the back burner? Does something else need to move into place as my main priority right now because there's other things that are actually vying for my attention in new ways that I need to pay attention to.

and rearranging your life to support prioritizing that priority. It's a lot, but when you do the hard work up front, then it's easier later that decision what can I do now that makes other things easier or unnecessary later. This is one of those things. Prioritizing the right goal at the right time, or whatever goal you say is right at the right time is what your brain needs, and

prioritizing is just one of those shortcuts. Routines, habits, motivators, Those are other shortcuts that we're going to be talking about in the coming months. But know that this is just one tool in your tool belt to reach your financial goals. It's a really good one. It's why we did a whole episode on it. And it applies not

just to financial goals but also with spending. So when you're going to make your budget, your income may not be able to cover meeting everything you value in the way you want to value it, in the way you want to meet it. So prioritizing can help you set those And obviously it's not just one thing that you can spend money on. You can have multiple things you value, but it can help you prioritize what ways you're going

to be meeting your values. So where am I getting the most bang for my buck, so to speak, in my spending. What kind of event or product or service can meet most of my values in one time? Stuff like that you start to optimize. But this we thought it was really important for introducing the student loan topic.

break sometimes because life season demands it. And you know what else our life season demands in every episode.

could get a gauge on priority items. The highest on their priority list was also the most expensive, around eleven hundred. I was feeling so defeated, and then I reached out to another mechanic. This mechanic diagnosed my car and reported back to me in less time, and I was relieved when he explained that the items the other mechanic had reported were not urgent after all, and we're mostly recommended maintenance. Also,

my car did not have a leak. This mechanic helped me to distinguish priorities and those items that were not emergencies after all. Further, he completed a couple maintenance items the same day of my appointment, and get this, what I would have paid nine hundred dollars for at the

first mechanic ended up costing me four hundred dollars. I also got a quote for the top priority item from the first mechanic, and this expense will be three hundred dollars less with the second mechanic, and I can schedule this later in the year. Not urgent after all, I am thrilled to have sought this second opinion, which saved me time, panic, confusion, stress, and almost fifteen hundred dollars of unnecessary expenses.

need to happen. And you have saved money by consulting and getting a second opinion and really giving yourself margin and taking a breather in the midst of it all. I think if you you didn't have the wherewithal this for another person, they could have received that been like, ooh, my car's going to fall apart. Okay, here's all of my money. Do the twenty eight hundred dollars worth of repairs. But your ability to pause, say, wait a second, this

might not be accurate. Let me get a second opinion, let me make a plan for how to tackle these problems in order of urgency. Well done, Gabby, You saved yourself money, You've learned about prioritization, and you've turned around and taught the rest of us.

That is one of the great values of having community on your side in this journey is that you can seek them out for second opinions.

So I had a baseline for sure, like I wanted to be paying at least three fifty a month, and that was part of my spending plan at the time, and alongside what I hope to spend on groceries and bills, and you name it, three point fifty every month was going to go towards debt. But of course then I had a challenge every month to throw as much extra

as possible. So those were the years when if someone even gave me twenty bucks for my birthday, that was a ding ding ding celebratory that's going straight to my debt. I'm not saying everyone should do this, because there should be permission to be able to spend on yourself and celebrate along the way, But for me.

It's really a delight to see people using what social media was intended to be, like bringing people together to help each other reach similar goals. But also for me, I wasn't on social media like that back then. I'm still not on social media like that. Having Travis debt clutch.

out verbally. Many of you know we have a membership for our listeners who are paying off debt where we're doing monthly money challenges. Speaking of gamifying and staying motivated and having community. There are accountability groups in there, and we want to congratulate one of our members for a big win. This comes from Emmer's end that says declutter challenge when there was a book club book about minimalism

and it really resonated with me. I'm trying to look at it as lessons learn for the things I can't sell, but knowing that it's taking up space that isn't needed and that someone else can use as a huge motivator. For me, this challenge helped spark my excitement again heart emoji beautiful love motivation.