How I paid off a $45,000 student loan FAST
Yes, you read that right, I paid off a 45k student loan FAST. How fast? Just over a year and a half, 1 year and 8 months to be exact.
Crazy? Maybe a little. But freeing? Heck yes!
Background info: I spent 6 years getting 2 degrees and in that time Canada kindly loaned me 45k to assist me in obtaining 2 very expensive pieces of paper. After graduation I turned my college side-hustle (Squarespace website design) into my full-time job, so I 100% relied on my online business to support my life and pay off my loan.
In today’s post I’m going to explain both the personal financial decisions I made that helped in me paying off my loan so quickly, and I’ll also share the business decisions I made which helped too.
First I’ll start with the personal decisions, then the business ones! So let’s not waste any time, here’s what I did:
Personal financial decisions:
I decided & focused:
The first month I made my student loan payment (which Canada decided would be $500/month), I quickly realized that I paid $500, but slightly less than $300 came off my loan. Over $200 went to interest! Upon realizing that only slightly more than half of what I was paying was going to the principal of the loan itself, I decided
1. Canada is clearly making bank off giving students a seriously shitty interest rate and
2. I was going to get rid of that loan as fast as I possibly could, so I could avoid paying crazy interest for years.
That decision honestly was a major catalyst of this whole thing.
I decided I was going to get rid of the loan as fast as possible and I focused on everything I could do to get rid of it as quickly as I could.
Making that decision is honestly what got the ball rolling!
I had always assumed that right once I finished college I’d start saving for retirement, but after reading a few finance books, I realized that I’d be unlikely to make $200/month on anything I’d invest in for retirement, so it was more financially savvy to pay off the loan quickly, and save that $200/month interest payment.
I then made the decision to pay off my loan first, then once it was done, start saving for retirement.
Read finance books:
Books are a lifetimes worth of someones knowledge packaged up into a few days of reading. So basically, reading is the ultimate life hack.
I wanted to get educated on finances, so I headed to Amazon to pick up some essential finance books so I could make a proper financial future game plan (and ensure I was doing the right thing with paying the student loan first, then saving for retirement.).
Here’s a couple books I’d recommend related to debt & financial planning:
The Money Book for the Young, Fabulous & Broke by Suze Orman
Created a visual reward:
You know at charity events when they have that big thermometer thing and for every donation, the red inside the thermometer rises? I whipped out 2 pieces of paper and created myself a debt-paying-off thermometer.
I then stuck it up beside my desk and every time I paid a bit more on the loan, I colored in the thermometer the appropriate amount. Normally rewards involve buying yourself something, but clearly, that would defeat the purpose here, so I made my reward coloring in the thermometer. I legit looked forward to breaking out a highlighter and coloring it in every time I paid a bit more on my loan.
(Now in place of the debt thermometer is the letter from the Canadian government thanking me and congratulating me on paying off my loan.)
Didn’t increase my lifestyle:
When you live as a university student for 6 years, you get good at living a pretty modest lifestyle.
I decided consciously that I wasn’t going to suddenly start living large now I was making money and working. I knew it would be hard to increase my lifestyle and then save at the same time, or to increase it and then decrease it again later. So I decided to keep living my modest university-life ways until the debt was gone.
I didn’t eliminate every luxury from my life, but I also didn’t go crazy.
I still travelled, but I booked flights wayyy in advance to get the best price, purposefully picked flight dates based on price, stayed in hostels and went to cheaper countries. (No Switzerland and Denmark for me back in the day.) We did hire a cleaner for our apartment, but he came every other week instead of every week. I shopped at H&M, not Nordstrom.
About a year after finishing college, my boyfriend and I debated moving to another, more expensive city and/or getting a nicer apartment. We decided not to move but to stay put right where we were in our cheaper city and very normal, non-luxury apartment.
I listened to alllll the ads on Spotify and there was no Netflix for me. I didn’t pay for any recurring monthly subscription services or apps. I also skipped on the gym and went running outside.
Paid my debt first:
When I got paid every month, the very first thing I did when money hit my account was to transfer it over to my student loan. I paid the required monthly amount ($500) and took a moment to feel great about myself for brining it down bit by bit. I did this right away to get the money out of my bank account, reinforcing the idea that that $500 was note mine, and so I didn’t feel more baller than I really was when looking at my bank balance.
At the end of the month, any extra I could throw on the loan, I did. When I paid more than the $500/month, the extra went straight to the principal of the loan which really helped bring it down bit by bit.
Repeated ‘I don’t need anything’ to myself in stores:
When I walked into a store, I took a moment to look at the spending frenzy going on. Knowing the statistics on debt, I knew that pretty much everyone in that store had debt and yet was spending like crazy anyways. I reminded myself in my head that “I don’t need anything” and again felt good about my decision to not buy a bunch of random stuff I didn’t need.
Shopped only from my list:
But let’s be real, sometimes you do actually need things. Toothpaste, shampoo, socks, etc. When I would go shopping I’d write myself a list on my phone of what I was going to buy, then I’d head into the store and ONLY buy what was on the list.
No impulse buys for me.
This is especially important when you’re in one of those stores that has everything. You know the story, you walk in for toothpaste and walk out with toothpaste, nail polish remover, shampoo, conditioner, moisturizer and mascara.
Made a budget:
This one is reallyyyyy vital!
I whipped out a Google Doc, put a table into it and listed out all of my expenses. I had my necessities in there (rent, health insurance, debt repayment, etc.) but I also set budgets for things which are necessary but are not necessarily exact amounts owed somewhere every month (eg. I set a grocery budget, and a budget for ‘daily spending’ which I could use for eating out, transportation, travel, movies, etc.).
Tracked my spending:
Know when you look at your bank account and you just think ‘Where DID all the money go?’ and you legit have no clue how you breezed through it all so fast? Tracking your spending completely eliminates this issue.
At the beginning of the month, I’d set aside money for ‘daily spending.’ Let’s say it was $500, and there’s 30 days in a month, so that’s $16.66/day. Then I tracked every single dollar (or while I was in Europe, every euro) I spent. I used the notes app on my iPhone for this.
I didn’t write down rent and health insurance and student loan repayment because it was always the same amount, but for my ‘daily spending’ I wrote down every expense, down to a $3 coffee or $1.50 for parking.
Then at the end of the day I’d calculate how much I spent and if I was over or under my budget. By the end of the month, I had to be on budget, or that amount I was over would come out of the next months daily spending.
When you have to write down every single expense and you know you’re already $80 over budget for the month, you seriously think through every purchase and make wiser decisions. And you also never need to wonder where the money went, because you can look back at your note and see where every dollar went.
Took the German approach to money:
(FYI: I moved to Germany after graduation. My fiancé is German.)
Once I got to Germany, if I told someone I had 45k in student debt, the person would almost fall out of their chair in horror.
Germans have a massive aversion to debt. It’s actually pretty interesting, a very small percentage of the country owns a home (ALL debt is bad debt to them that should be gotten rid of ASAP, including mortgage debt), their “credit cards” are literally just debit cards that they call credit cards - you can’t actually spend money you don’t have on them, and they are the most cash-loving modern country in the world.
Basically, spending money you don’t actually have is a big cultural no-no here and debt is seriously not okay with them.
So I started to think like a German.
I spent the money I had and stopped spending when I didn’t have anymore. Yeah I’d be over my daily spending budget now and again and would have to reduce the money I had the next month, but I was by no means paying off my student loan like mad and then racking up a credit card bill I couldn’t pay off in the process.
I find in Canada/America because everyone has debt, and student debt is seen as ‘good debt’ we kinda all feel like “well who cares, we all have it and it was a good investment”.
Here it’s different, and I felt the pressure to get rid of my debt ASAP. (Unexpected lucky side effect of moving here I guess.)
While recommending moving to Germany would be a bit far-fetched, you could just adopt the German mindset. “Spending money you don’t have is not okay and debt is not cool.” Every time you go to spend money you don’t have, just picture some horrified German in your mind. Who knows, maybe it’ll help!
(Though if you want to move to Germany, do know that it’s farrrr cheaper to live here than in most Canadian/American cities. Just sayin’.)
Business financial decisions:
(Btw, if you don’t have a business or side-hustle, now might be a good time to consider starting one to help pay off that student debt! You can find your perfect business idea with my online business matchmaker training here!
Doubled my prices:
I’ll be honest, I didn’t specifically do this in order to help pay off my debt, but it was a lucky side-effect that I could pay down my debt faster because I was charging more. About half a year into paying off my debt, I doubled my custom web design service prices from $2,500 to $5,000.
(If you want to know how that went, you can see the results of that decision here.
If you’re offering services (or products even too), it might be a good time to reevaluate your prices and up them.
Then, don’t increase your lifestyle, but instead drop your extra earnings directly onto your loan!
Added scaleable products to my offerings:
I had been doing custom 1:1 website designs for years, but realized once I booked myself out and started a waiting list that
1. Demand and supply were off. I had more potential customers than I could serve one on one, and
2. My earnings were limited to the number of hours I worked.
In an effort to separate the number of hours I was working from my earning potential, I created a product, that was my Square Secrets e-course, a course teaching you how to build a killer Squarespace website.
With my course, I could create it once and then sell it to as many students as wanted it, without increasing the number of hours I was working.
Charged in USD:
This one is major here friends, and it was a very conscious decision.
Most Canadians charge in CAD, because well, they just never thought of doing it differently. But I’m here to tell you to change those prices over to USD right away!
You instantly give yourself a revenue increase, and because most of the internet is priced in USD, your customers were probably expecting your products/services to be in USD anyways.
I was VERY lucky because my student loan was in Canadian dollars, and I (purposefully) was earning in USD.
The Canadian dollar was down compared to the US dollar and so that gave me extra motivation to pay off my loan ASAP while the dollar stayed low. Every time I heard news that the Canadian dollar was going down or staying down, I was probably the only Canadian cheering about it.
Took ALL of the money OUT of the business:
You know how most people say that while they were building their business, they reinvested every dollar back into the business? Yeah, I did the exact opposite.
I tracked my business expenses like a hawk and was equally as modest with business expenses as I was with personal expenses, because everything after business taxes and expenses was mine.
I calculated my take home pay like so: Business revenue - expenses - taxes = my take home.
Anything I made over my needed personal budget (rent, food, daily spend spending money, etc.) went onto my loan as well.
People often start businesses to change the world for the better or solve a problem. I’ll be completely honest, this business started to help fund my life and pay off my student debt. I of course still solve problems for my customers (otherwise I wouldn’t have any) but at the beginning I wasn’t interested in blowing my profit on expensive conferences and pricey coaching programs.
I did spend money in my business when I thought it was necessary and seriously would help the business move forward, but otherwise, I kept my expenses minimal and took all the money I could out of it to pay off my loan.
My financial habits are very different now:
Now I know I might have just painted what feels like a pretty bleak picture of modesty, tracking every dollar and not allowing yourself any luxuries, but I have good news, my life is totally different now.
And it only took 1.5 years to be completely free! (It’s reallyyyy amazing how much you can pay off when you make the decision and focus all your efforts on it!)
Once I paid off that loan, I definitely increased my lifestyle personally and made some investments in my business.
These days I’m ballin’ with Netflix and Spotify subscriptions and I go to the nicest gym in my city (gotta motivate myself to go there somehow).
I travel to more expensive countries and book a 5 star hotel if I want to. I have our cleaning man come every week and just the other day I dropped $250 on a pair of sandals totally guilt-free, knowing that my money is mine to do whatever I feel like with, because I owe no one.
So do know that while yeah, it’ll take some seriously modest time to pay off the loan, it’s just a season and your life will not always be this way.
A little earnings disclaimer:
P.S. I know if you’re looking at the current business income reports you might be thinking “yeah no wonder you paid off your loans so fast, your business makes great income!” And while yes that’s true now, my business was at it’s very beginning stages when I paid off my loan and wasn’t making nearly what it is now.
When I paid off my loan my average take-home pay was $3,400 USD/month or $40,800 USD/year. Which, if my Googling is correct, turned into about $4,386 CAD/month x 1 year and 8 months = $87,720 total take home in that time - $45,000 student loan = I lived off of about $42,720 CAD in that time. So I saved justtt slightly more than I spent.