calculations, numbers, oops, student loans

Oops!

OOPS!-2

So now that I have a job, I finally have money coming in again. Which is great. I get paid twice a month: once in the middle of the month and once at the end. And now that I know how much my take-home pay is, I have fewer crazy merry-go-rounds spinning through my brain than I did a few weeks ago.

The monthly saving/spending/debt repayment plan that I devised, based on my salary and semi-monthly paycheck amounts, looks like this:

Pre-tax retirement contributions:

  • 403(b): $216 (This is the number that maxes out the partial employer match)

Post-tax retirement/debt/investing:

  • Student debt repayment: $1000 (this is far more than my minimum payment)
  • Roth IRA: $100 (I’m considering increasing this to $200)
  • Betterment auto-deposit: $100

Spending:

  • Maybe I’ll go into detail about this in a later post, but for now I’ll just say that I am pretty content with my current spending habits. I’m super motivated to pay down debt these days and so don’t tend to make a ton of extraneous purchases.

Whatever is left over from my paychecks and any extra money I make will either go (depending on how I feel):

  • into my Ally emergency fund to earn 1% interest OR
  • towards debt repayment OR
  • into my Roth IRA

A reasonably logical plan, right? Money to retirement, money to debt, money to investments, money to bills/expenses, and then do something responsible with the rest.

I got my first paycheck on March 15th and was super excited to start following through on my awesome foolproof money allocation plan. I had initially been planning to put $500 towards my student loans from each paycheck (for a total of $1000/month as outlined above), but I figured, hey, the earlier I make these payments, the less interest will accrue, so why not pay, say, $800 out of the first paycheck and $200 out of the second? Logical enough. I made the $800 payment early in the morning on the 17th and then went to work. Let me stress that this was a totally elective payment that I absolutely did not have to make.

And this is where the “oops” comes in. In my excitement I had managed to temporarily forget about three important points:

  1. I had very little money left in my savings account (i.e. emergency fund), as I had been unemployed throughout January and February.
  2. Rent was due on April 1st.
  3. February had been an exceptionally high-spending month (the highest since I started tracking my spending in January 2015), due to several very unusual and mostly unavoidable expenses at the tail end of that month, and as a result, I had an exceptionally large credit card payment due April 13th.

Over the course of the day I slowly started remembering all three of these points: Shoot, I have to pay rent…Shoot, I think my credit card balance might be sort of high…Shoot, my savings account is practically empty. By the end of the day I had finally put it together that I did not (and still do not today) have enough money, even counting my remaining emergency fund money, to pay both my credit card bill and my rent. This is a totally new experience for me—I have never before had a credit card balance that exceeded the amount of money in my bank account. It honestly unsettled me a little for the first day or so.

However, I want to be sure not to overexaggerate the seriousness of this situation. While I don’t currently have enough money in either of my bank accounts to pay both my credit card bill and rent, I will be able to pay each of them by the time they’re due, thanks to the paycheck I’ll be getting this week. And in the meantime I can put my groceries, etc. on my other credit card, which has a different due date, and in 1-2 more paychecks I should be mostly back on track. (It also might have been possible to cancel the student loan payment before the money was transferred, though I didn’t look into this.)

Oh, and not only that, but I remembered last week that I have two additional safety nets: between my Betterment* account and my Acorns* account, I have about an extra $900 cash that I could withdraw if absolutely necessary (though these are investment accounts, so I’d rather keep the money in there and let it do its thing).

I know this story probably makes me sound like I’m either a complete space cadet or completely terrible at math. In truth I am neither of these things. I just got really, really excited about getting a paycheck and being able to put more money towards my student debt, and in my excitement I didn’t bother to engage in any simple arithmetic.

I also think some of the confusion resulted from a phenomenon that Maggie wrote about recently: overlapping months. In other words, while I plan my spending according to the calendar month, my credit card billing cycles are not aligned to the calendar month. But once I get back on track, I’ll plan to align my credit cards so that the billing cycles end on the last day of the month, pay them immediately upon receiving the notices, and move on to the next month right away.

The lessons I can take from this experience are pretty simple:

  1. Don’t make elective student loan payments that are larger than the amount of money you actually have (taking credit card balances into account).
  2. Build your emergency fund back up so you don’t have to go into credit card debt if you have an actual emergency.
  3. Make adjustments to credit card billing cycles to avoid having overlapping months.

I’m also working on coming to terms with the amount of time it’s likely going to take me to pay my loans back. Sure, I can be super frugal, I can put a substantial percentage of my income towards loan payments, and I can try to make some extra money on the side. But I have a lot of debt (see debt progress graphic in the sidebar), and there’s no way I’m going to be able to completely get rid of it this month, or this year, or probably even next year, even if I try reallyreallyreally hard. Paying back this much money requires time, and time brings with it other expenses, like groceries and rent, and occasionally shoes or bike tune-ups, and balancing all of this is going to require a lot of ongoing patience and restraint and well-thought-out decisions. For a long time.

That all being said, I am actively working on making extra money on the side:

  • I’m doing some freelance writing and plan to take on more (Know anyone who wants to hire me?).
  • I’m still participating in scientific research studies as often as I can.
  • I just applied to work for a tutoring service. I’m hoping my PhD will help me land some good tutoring gigs. (On the other hand, you can’t throw a stone in my neighborhood without hitting four or five people with PhDs. Hopefully not all of them are looking for tutoring gigs.)

And finally, on the topic of making extra cash to get rid of debt faster: I had the chance this week to look over an advance copy of Hustle Away Debt: Eliminate Your Debt by Making More Money, written by my friend DC over at Young Adult Money. This book is a comprehensive guide on how to get rid of debt faster by making extra money on the side, and it’s chock full of creative ideas and guidance on figuring out which type(s) of side endeavors may fit well with your skill set and lifestyle. I definitely recommend it if you’re looking for ways to increase your income and pay off debt faster. It won’t be available till May 5th, but you can pre-order a copy here.

Has anyone else ever accidentally put too much money towards their student loans or other debt? Tell me I’m not alone!

Disease Called Debt

79 Comments on “Oops!

  1. It’s so smart to put money in an IRA while you’re paying off debt. I didn’t, and I’m regretting it now. I am truly horrified by my retirement accounts. They are in sad condition.

    I would like to know more about Betterment. One hundred bucks doesn’t seem like that much to “sacrifice” a month to start investing outside of retirement accounts. Hmmm…

    1. Well, if you read the later comments on this post you will see that a lot of people are challenging my decision to use Betterment without maxing out my Roth IRA and 403(b) accounts first. But here’s what I will say about Betterment:
      – They do use some sort of algorithm that minimizes taxes (but yes there are still some taxes)
      – My Betterment account is not an IRA, so if I absolutely need the money, I can withdraw it without a penalty (which for me right now is a good thing).
      – It’s fun, and has a reeeeeeally nice user interface. 🙂

      Regarding the decision to put money towards retirement: yeah, it’s a tough call. I’m pretty anxious about my retirement accounts because they are so extremely small, so I do feel good about putting some money in there. It’s really hard though: a big part of me just wants to pay down the debt.

      1. That’s smart; you need money you can get to for big purchases or emergencies if necessary,otherwise you’ll end up pulling out the Credit cards.

        1. Yes, that’s exactly what I’m afraid of. Paying off debt is all well and good, but I need to do it without going into more debt!

  2. I used to have cash flow problems like this all the time (especially because half of my wage used to be commission based, which was really difficult for budgeting.)

    One thing that REALLY helped me is this app https://balanceforecastingapp.com (which unfortunately, I think is no longer an app and only for use via the website, but I’m not 100% sure.) You pop in all your regular bills and income and it tells you exactly how much you’ll have in the bank on any given day in the future. Not only did it keep me out of this sort of trouble, but it also helped me realise when I had spare money to make extra lump sum payments.

    I used this religiously for about 4 years, until I became debt free and downsized (at that stage I hardly had any bills.) Good luck! x

    1. Thanks for recommending the app/website; that’s not one I’d heard of before. It’s good to know that other people have problems with this issue as well!
      I imagine commission-based wages would be really tough — a whole additional challenge!

  3. I can see how that could happen because I know you are super excited to get that debt paid off. I think once you settle into the routine and the rhythm of your finances you’ll be OK. I was tempted to pay the rest of my remaining zero percent credit card balance, but it’s not going up until dec so I was encouraged by my financial coach to sock it away (I’m using ally too) so that it gets some interest and then just make the minimum payments so it’s paid off by the time the interest goes up. It’s so tempting to just throw a huge chunk a change and be done with it, because I do have the money, but I get the logic behind what she is saying. Sometimes that need to pay off debt makes the rest of our common senses shut off! 🙂

    1. Ah, that’s such a good example. I can totally relate — I would probably also want to just pay the credit card off, but I can see the logic in what your financial planner is suggesting. Three cheers for taking the long (but cheaper) road! 🙂

  4. It sounds like you learned a good lesson, and you’ll find your rhythm in a few months. My 2 cents is that It might be a good idea to make a more moderate debt payment for a month or two to rebuild your cash reserves, but I’m pretty conservative about having a reserve.

    1. Yeah, I’ve been thinking about that. I think you may be right. It’s tough because I’m really motivated to pay off the debt, but it’s just not smart to sit around with nothing in the bank. I’ll see how I’m doing at the end of this month when I get paid and tally everything up!

  5. The struggle is real! We’re committed to paying at least double our mortgage payments every month, and then I put my side hustle (yay, tutoring!) money towards it as well. For the past few months, my side hustle $$$ was entirely consistent, so I just had a set amount of money I was paying. Then, I forgot I quit one client (loooooong story) last month. Glad I remembered by the time I got to the “Are you sure?” screen! Hooray for you for having so much momentum going. That’s really inspiring. Short-term oops, but long-term victory, I’m thinking!

    1. Wow, at least double your mortgage payment — now THAT is inspiring. And thanks for the encouragement; I feel really good to have started paying this money back, even if it’s kind of slow going. I’m hoping to increase my payments in the not-too-far-off future, but for now this feels like a good place to be (except for the absent emergency fund, which I need to work on!).

  6. I use Quicken to track my finances and I enter everything manually. It may be old school at this point, but one thing I love is being able to enter planned transactions for the future so I can forecast exactly what my balances will be for the next month or so. It gives me peace of mind and has come in handy more than once when planning payments and transfers.

    1. Ah, interesting. I admit I’ve never used Quicken — I actually have my own Excel spreadsheets that I’ve been refining for a while. They work quite well when I use them — which I obviously didn’t earlier this month! I need to keep a closer eye on them. I also use Personal Capital, which I also did not check when I made the student loan payment. I guess the key is actually using whatever system(s) you’ve set up!

  7. I assume your Betterment account is a regular taxable account? I’m curious about your decision to put money there when you (presumably) aren’t maxing out your tax-advantaged accounts.

    1. Ah, good question. Betterment does use some sort of algorithm that minimizes taxes, but the primary reason I put a little bit of money in there is because I know that if I *absolutely* need it I can easily get at it. Whereas with a Roth IRA and 403(b) I wouldn’t be able to withdraw it in most cases without paying a penalty. So it sort of functions as a secondary emergency account, plus I just really liked the idea of a robo-investor and wanted to try it out. I definitely don’t plan to put more than $100 per month in there.

      1. Although, as someone else just pointed out to me after I wrote this comment, I can withdraw the contributions (though not the earnings) of my Roth without a penalty. I think I have to admit that the Betterment account isn’t totally logical…but somehow I still want to keep it! I think it may have something to do with the extremely elegant user interface. 🙂

  8. Hi Friend! I like your enthusiasm. I do have a small concern that you have money going a lot of places and you may lose your focus. I’m a big fan of picking a goal and sticking with it. If you feel your emergency fund needs padding, pad it and then move to your next goal.
    I also believe that you shouldn’t be actively investing in taxable investments until your tax advantages space is full. Is your Betterment investment going into an IRA?

    1. Ah yes, this is an issue I’ve been thinking about a lot. I do appreciate the advice; however, I have a lot of anxiety around my retirement savings, which are so teeny-tiny as to be almost non-existent. So I think it will give me some peace of mind to build them up at least a little while paying down debt.

      To answer your question about Betterment, I started doing a $100 monthly auto-deposit about eight months ago because I wanted it to serve as sort of a secondary emergency fund that I could use if absolutely necessary. I can’t get at the money in my Roth IRA or traditional IRA or 403(b) without paying a penalty, but if I *absolutely* needed the Betterment money, I could withdraw it. But because it’s an investment account, it can potentially grow faster than a regular savings-account emergency fund. So, best of both worlds? Or something? I’m definitely not going to increase my monthly contribution beyond $100 in any case. I think I’ll reevaluate when I’ve reached the 1-year mark.

      1. Whoops, or as I just found out, I guess I can withdraw the contributions of the Roth with no penalty (though not the earnings). In any case, I’m still going to keep the Betterment account for now. I think it’s just going to be one of those choices that is not 100% based on logic. 🙂

  9. Congrats on the new job and consistent income stream! Curious why you making contributions to Betterment when you aren’t going to max out your 401k first? Also just as a helpful tip I do a two-month look forward so that I can keep an eye on my cash flow, so I don’t get in a sticky situation by cutting it close. So right now in my excel it shows April’s paychecks coming in, rent going out, credit card bills going out, so I can keep track of where my checking account will be and not invest too much money at that time. It’s simple and I’d be happy to share it with you if you’d like. Take care.

    1. Good question about Betterment. I opened an account about eight months ago because a) I was just curious, and b) I thought it could serve as a sort of hybrid emergency fund and investment account. In other words, it has the potential to grow faster than a regular savings account, but unlike my Roth IRA or 403(b), I can withdraw the money if I absolutely have to. I’m not sure it is necessarily the most logical choice from a mathematical standpoint, but it makes sense right now for me and my situation. I’m planning to reevaluate after the 1-year mark and see if I want to keep the account or dump the money into my Roth IRA.

      1. Ah, or as someone else just pointed out to me, I can withdraw the *contributions* of a Roth with no penalty, just not the earnings. In any case, it’s a good topic to keep thinking about. 🙂

  10. I totally understand your sentiment. There are months I want to use money from every possible budget category to make a debt repayment, but common sense reminds me that my family won’t be able to eat for a couple weeks if I do that 🙂 Not sure if you like budgets or not, but I use an app called You Need a Budget, and it handles credit cards flawlessly. The app operates in a way where you can trust that at any given time you have money in the bank to pay off your credit card as long as you don’t spend more than you bring in. So it doesn’t matter when you get paid or when your card it due, the money will be there. I’m having a tough time explaining it…it’s one of those things that you have to experience to fully appreciate 🙂

    1. Ah, yes, I’ve heard a lot of good things about YNAB. I think right now I’m going to stick with my own spreadsheets that I’ve made, along with Personal Capital. (And I should say that if I’d carefully looked at either of these tools before making my loan payment, I never would have run into this issue!) But we’ll see how it goes — I may reevaluate in a few months if I find my system isn’t working. Thanks for the suggestion! 🙂

  11. Great enthusiasm! It’s great that you’re starting the savings habit by contributing to retirement before you’ve repaid your student loans. I wouldn’t be putting anything into Betterment or Acorns though while you’re paying down debt, especially because IIRC your student loans are at a high-ish interest rate (6.8-7.5%?). I would make sure that everything is going to goals to keep you motivated. How long do you anticipate it taking to pay off your student loans?

    How much would you need to contribute to your 403(b) to get the full employer match? The way I look at things is in the order of return, which for you is:
    X% 403(b) employer match
    Y% pre-tax 403(b) contributions tax savings where Y% is your marginal income tax rate
    Z% student loan interest rate
    8% Roth IRA stock index fund investments
    1% emergency fund / short-term savings goals
    -20% to 8% taxable stock index fund investments

    I’m a super huge fan of a savings snowball in which you concentrate on one goal at a time. It really helps to keep me motivated!

    I’ve started paying my credit card balance on the 1st of the month, regardless of when the statement date was! That’s been really helping to keep the checking account balance under control. I also direct deposit all of my paychecks to my primary savings account and have an auto transfer from there to my checking account for my monthly spending plan set for the last day of the month. That way, I’m always living on last month’s income.

    1. Hi Leigh, thanks for the comment! As far as the 403(b), I’m already getting the full match — I called it a partial match because they’ll only match a certain (small) percentage of my contribution, up to a certain cap. And so I contribute just enough to reach that cap. The place where I’d really like to put more money is my Roth IRA; I have the Betterment account for a combination of reasons that may not be 100% mathematically logical, but make sense for me right now:
      – I can withdraw the Betterment money at any time with no penalty (whereas I can’t from my a Roth or 403(b)) so it functions as a sort of secondary emergency fund
      – The Betterment has the potential to make more money than a regular emergency fund in a savings account
      – I was just curious to try it out. I’m planning to reevaluate in July when I’ve had the account for a year and see if I want to keep it or just transfer the money to my Roth.

      That’s a good idea to just pay the credit card bill on the 1st of the month. I typically try to pay it as soon as I get the notice, but I could just as easily wait, and that would be less confusing.

  12. Way to put money away in an IRA while paying off debt. Paying debt or saving for retirement? It’s really a balancing act and I’d argue you can’t just do only one of them. Keep up the great work.

  13. When I started throwing all my extra money at my debt, I struggled with the cash flow aspect of my budget too. I like to pay my student loans as soon as I get my paycheck so there is no chance of me “accidentally” spending money that should have gone towards my loans. But with bills due at different times of the month it gets awkward. Now when I get paid, I use a spreadsheet and subtract all the bills that are due before the next paycheck and then figure out how much extra money I have to go towards my loans. I gets easier as you get into a routine with it. You’ll be back on track in no time!

    1. Thanks, yeah, I think this has been a good lesson and I’ll be back on track in a couple of paychecks (and will be more careful going forward from that point!). It does take a surprising amount of organization to keep on top of all of this, but luckily I love making Excel spreadsheets! 🙂

  14. You are not alone. I paid my student loan twice one month by accident. Didn’t remember paying it the first time. I’ve also accidentally paid the credit card payment to the water bill (I’m my defence, they are next to each other in the bill list). I have a better system now for keeping track of paid bills and I triple check all details before hitting the pay button online!

    1. Oh gosh, ok, I feel better now! It’s surprisingly easy to mix these things up, isn’t it? 🙂 I definitely need to be a little more careful, that’s for sure!

  15. Hah YES, yes I have. I accidentally got too excited about similar loan payments and forgot to map out the payments due for the next month or two. And then had to grip my seat for a few weeks as the paychecks came in and evened things up a bit 🙂

    Mistakes happen, and they will every now and again even when you feel like an expert at all this.

    1. Yeah, I think I’ll just call it “experience” and move forward a little wiser and a little more organized. It’s so easy to get excited about these payments, isn’t it? 🙂

  16. Hahaha, I love this. What an excellent pf mistake! It happened to me once or twice too- I always managed to pay all my bills on time, and I didn’t have a credit card while I was paying off debt, to avoid spending triggers. But I definitely was so into the debt payoff that sometimes I would forget ‘oh health insurance is due soon too…’ You’re heart’s in the right spot, and soon so will be your finances!

    1. Man, why is it so easy to make mistakes like this? It seems like making payments should be relatively straightforward. Ah well, at least I’m in good company. 🙂 Thanks for the encouragement!

    1. Oh no, that’s so weird — mine are quite easy to change online. I think it’s just in “account settings”. Sorry it’s giving you so much trouble. 🙁 It seems like something they should be willing to address with you!

  17. Thanks for mentioning my book! I really appreciate it! I think it’s great you are looking for ways to increase your income. I think you will find a lot of success freelance writing. As someone who has both freelanced and hired freelancers, it’s incredible how difficult it is to find quality writers. If you are a good writer who follows the format/instructions of your client you are likely going to be a huge asset to them. And at that point you can basically guarantee yourself side income if you want it.

    1. Yay, congrats again on the book! 🙂
      Yes, I definitely think freelance writing is a good gig for me. I’m hoping I can increase that over the next couple of months. It will be interesting to see how the tutoring thing works out too!

  18. I have definitely made this mistake! Back when I was paying off credit cards, a car loan and my student loans, I definitely got over-excited a few times. And seriously, it’s still a struggle. I hate debt so much that I want to pay off our mortgage like NOW and Mr. ONL has to keep reminding me that we need our investments to grow more than we need to pay off our house. I think it’s a good sign that you’re so stoked to attack your student debt and hope you won’t beat yourself up about it.

    I saw that you had an epic Twitter exchange about all this stuff, and I didn’t read it all, so someone may have already raised this: Are you wed to doing a Roth IRA instead of a regular IRA, or more to your 403(b), depending on which would get you lower fees? I know you’re likely in a low tax bracket now, which would make the Roth make sense, and the added flexibility of being able to pull out your cost basis without penalty is certainly good while you’re building up your e-fund and other savings. But, you would reduce your tax liability by contributing to a traditional IRA, which would give you more of your money now, and could help you pay off your debt faster just by virtue of having more cashflow. Hard to know the specifics without knowing your numbers, but thought I’d at least offer that! (Sort of like that crazy Medium piece a few months ago written by a disgruntled Yelp employee — she claimed to be losing more than a third of her income to taxes, which made me want to scream at her, “Then you’re over-withholding! Fill out a new W-4 so you can increase the money in your paycheck!” Okay, truly, that’s nothing like you. You are smart and logical, and I’ve never wanted to scream at you for anything. Just thinking about how you could have more money in your paycheck through a little optimizing.) 😉

    1. Yes, I’m favoring the Roth in general because of the low tax bracket thing. (The main reason I’m bothering with the 403(b) at all is because of the measly employer match.) That’s a good point though that that using the 403(b) or traditional IRA instead would have its own benefit. I think I may be too lazy to run the numbers right now, but I do appreciate the point, and it is definitely something to keep in the back of my mind for the next time I reevaluate.

      As it so happens, I am definitely overwithholding for a different reason — it’s kind of an embarrassing story, but I was filling out papers with HR last month and I wrote down 3 tax exemptions, and the HR lady was like, that’s a lot of exemptions, you should just claim less so you don’t risk owing taxes next April, and I was like, huh?, oh, ok, good point, and claimed 1 exemption instead. But the next day I was like, WAIT, why wouldn’t I just want more money NOW so I can minimize the interest that accrues on my loans? I was thinking of changing it, but then I decided to wait and see what my freelance payments look like (I should be getting one soon). I could be wrong, but I suspect that I will be paid in full up front for freelance work and then have to pay taxes on that income next year. And if that’s the case then it will work to balance out the 3-exemption thing. Otherwise I’ll probably fill out another W-4.

      Thanks for the suggestions! 🙂

      1. Okay, Roth makes sense, and I saw your note on Twitter that you sold your Betterment holdings to pay down debt. Completely support that. 🙂

        On the taxes, I think overwithholding to cover freelance work could make sense. But you could also just quietly submit a new W-4. 🙂 Owing taxes is not a bad thing (other than coming up with the money, of course), and you only pay a penalty if you have less withheld than the prior year. So even though we owed $10K federal last year, and $8500 this year (not gonna lie — both of those bills HURT), we didn’t have to pay an extra penalty because we had more withheld each year than the prior. But I also had a side hustle once that netted a fair amount, but never withheld enough because they factored my withholding as though that was my only job, no matter how many times I asked them to increase it. And so I increased my withholding from my main job to cover the taxes on the side hustle, and that worked well for years. So I can see both sides! Okay, I’ll get my nose out of your business now. 😀

        1. Ack, wait, there’s a penalty?? How am I so uninformed about this stuff? Also, it seems a little unfair that once you have more withheld, you can’t go back in the other direction. I had better look into this so I understand my options better…

        2. Sorry — don’t even think about penalties, because it won’t be an issue for you, pretty much under any circumstances. Assuming your income goes up, you’ll naturally have more withheld each year, and then this will never ever come up. We just always end up owing for a number of reasons (and we’re okay with that — rather have a choice what the money is doing than give a free loan to the IRS), and so the penalty calculator always comes up on Turbotax. We did owe one once and it was like $20, so not a big deal. But more importantly, yeah, make sure you’re not overwithholding, at least not massively, though worst case, you get a windfall next spring to put against your loans. That’s not so bad either! 🙂

  19. Oops 🙂 I’ve done similar, I just get so excited. One time I accidentally added an extra 0 on my phone bill ($790 instead of $79) and they would not refund it, I was so annoyed with myself.
    Great that you are so excited to pay off the debt.

    1. Oh my gosh, that’s insane that they wouldn’t refund the money! I assume you at least got to put it towards future payments. It’s easy to get excited, isn’t it? 🙂

        1. Ah ok, that’s good! But I still say they should have given you the option of getting it refunded, since it was CLEARLY a typo. :/

  20. I’ve done this before, so no judgement here!! I think it’s easy to get caught up in “debt payment enthusiasm”. It’s for a good reason, right??!!

    1. Yes, exactly, I feel like my intentions were good; it was just my attention to detail that was lacking! 🙂 It’s amazing how easy it is to get overenthusiastic, isn’t it?

  21. We have cut it close in the checking account with early debt payoff, and also had to adjust all our auto-pay bills to the first of month for a new job that pays once monthly. We do try to pay the credit card bill of frequently–more than once a month–to keep the checking account “close to reality.” But it’s easy to get excited about debt payoff and forget what else is happening with your money!

    1. Oh, that’s such a good idea to pay the credit card more than once a month — I should do that once I’m back on track. Thanks for the idea!

  22. As someone who also gets paid this week, I feel you on the excitement of knowing that you’re about to get paid!
    That sounds like a scary situation, but it sounds so powerful to be able to cut down your loans by $800! Congratulations on that!

    1. Yay paychecks!! 🙂 And thanks — I do feel good about making some sizable payments! I just need to be a tad more careful with my spreadsheets.

  23. You definitely aren’t alone. I’ve often got caught up trying to kill debt quickly only to have it bite me later on in the month. I’m hoping at some point I will learn to pay the credit card first and then use anything that’s left to pay off the loans. (Total aside, when I read the merry-go-round part, there was an actual merry-go-round on my TV)

    1. Oh my gosh, that’s so funny about the merry-go-round! Synchronicity!
      Yeah, it is surprisingly easy to confuse these deadlines — definitely something I’m continuing to work on.

  24. As soon as I wrote that post, I overdrew my account! I threw money into savings and forgot about an outstanding check! So, yes. I’ve been there. But now that all my billing is streamlined, hopefully it won’t happen again! Also, I love the new plan!

  25. The thing that saved me from getting confused about credit card balances and how much I had in my bank account was YNAB. I think I’ve wrote about a dozen times on my blog how it’s changed my life 🙂

    Great plan on paying down your student loan! Soon this will just be a funny anecdote about that one time you were a bit too overeager to pay down your loan.

    I’ve also been looking at other avenues for side hustles, but haven’t had that much luck. I wanted to be an Uber driver for a second before my wife killed that idea bc she didn’t want me to get attacked by some drunk person. Back to the drawing board for me.

    1. Yes, I know you’re a fan of YNAB! 🙂 I think it sounds cool for sure, but at this point I’m pretty happy with my spreadsheets and personal capital (assuming that I actually bother to CHECK my spreadsheets and personal capital, which would have prevented this whole situation!). I guess that’s the key — whatever system you’re using, USE it! 🙂

  26. Hey Sarah,

    I tell you, I can definitely relate to the excitement of paying off debt and having oops moments. One thing that drives me crazy is waiting on my paycheck though. I guess that’s why I’m so gung-ho about getting a month ahead of my expenses. I’m known to be overzealous and pay entire balances on my credit card and I recently done this and completely eliminated my bill all together. Thankfully, we had a little extra cushion in our checking accounts so now I have to focus on building it back up. I figured the money in the account would be better served to killing interest on debt than sitting in my checking.

    1. YES, waiting on the paycheck is so tough. I definitely have the goal of getting a month ahead in the near future — I think I can probably make that happen by June or so. I would love to build my emergency fund back up to $5000, which is where it used to be, but that will take a little longer. It’s so hard to let money sit in the bank when I have debt to pay off, but I know that it’s important to have that safety net, so I need to make it happen.

  27. I remember a phone call I received a few months after graduating college. It was from the bank whose rep informed me that my student loan interest payments have started and I missed the first month’s payment. My reaction was something along the lines of “What? I have to payments to make?”. eek embarrassing. The good news is that got me focused on paying off my loans asap and I was able to do so within 2 years.

    It’s a great sign that after receiving your paycheck, you immediately thought about paying off debt. Many people think about what bars to spend the money at. You’ve got the right mentality!

    1. Thanks, George! I am definitely motivated to pay off this debt; I just need to be a little more careful so I can also pay my rent in the process, haha. That’s awesome that you paid off your loans in two years — congrats! My loans will probably take a bit longer than that, but it’s always inspiring to hear about people who have already gotten through this process successfully. 🙂

  28. I had a bit of an oops this month, too, related to overpaying student loans. I was so confident that I’d get a job I had applied for that I went ahead and made an extra 1k payment to my student loan (totally elective). Well, didn’t get the job and now I’m kicking myself that I could have put that away for when I’ll be unemployed when my contract ends in a couple of months. Oops! Oh well, at least it went to a good cause?!

    1. Oh gosh, that’s tough. It sounds like there’s still time to keep looking for another job before your contract is up? In any case, I can relate — I made some large student loan payments while I was unemployed in January and February, because I thought I’d get a job sooner than I did. In retrospect, that was probably not the safest choice.
      Best of luck in your job search!

  29. Ugh, I feel you. The only times I’ve ever come close to over drafting in like the last five years are when I would get overzealous about a debt payment or over contribute to a savings goal. And then I would feel like a dope trying to figure out how to rebalance things to pay all my bills on time.

    To be fair (to both of us) there are WAY worse reasons to possibly overdraft.

    1. Yes, there are worse reasons — that’s a VERY good point. And luckily this isn’t a dire situation. That all being said, it was fairly unsettling — I think I’ve learned my lesson!

  30. You’re definitely not alone, in fact – I am holding myself back from pulling the trigger and eliminating some debt right now. I recently got my tax refund and my bonus and want to throw that towards my loans but know I have to reserve money for preparing to sell my home in the next few weeks. It kills me to see that money sitting in there and see the interest growing on the loans but I know I need the cash first! I’m reminding myself, slow and steady wins the race!

    1. Oh my gosh, I know what you mean — letting money sit in a savings account (even a high-yield savings account) is so difficult when you have debt to pay off. But it’s so important to have that backup when you need it. I’m going to try to get my savings account up to $4000 and restrain myself from transferring it to debt payoff…but it’s so tough! Good for you for keeping money on hand for your upcoming transition.

  31. Hah! This is kind of a great mistake. My feeling about paying off debt is that I was much more successful when I did it first thing rather than waiting. However, *first* I did pay my rent, so there’s that 🙂 regarding the credit cards: These days I rarely wait until the bill comes to pay them. I tend to pay pretty frequently, several times a month, but if you’re having trouble syncing them, you might try just paying the balance at the end of the month, even without the bill being officially due. You should avoid interest that way just as easily.

    1. Yes, I’m thinking that just dealing with stuff at the end of the month is the best option. I don’t usually like to wait until the due date anyway. I hadn’t really thought of making >1 payment per month, but you’re right, I could totally do that too. I’m going to start doing a better job with this in April for sure.

  32. It sounds like you’ve got the situation under control and hats off to you for being so keen to make that debt repayment! I commend you for wanting to put money away for retirement while paying off debt. I didn’t do that as our debt was unmanageable at the time and I needed to focus on getting rid of that first before thinking about retirement planning. I have a lot of time to make up for now.

    1. Thanks, Hayley. It’s definitely a difficult call with retirement vs. debt. I don’t know if I’m making the right decision mathematically or not, but I think it’s the right decision for me psychologically, at least right now. We’ll see how it goes!

Leave a Reply