I recently overheard a woman discussing making a purchase. “It’s only $50,” she said, “I should just go ahead and buy it.” I’m not sure what she was buying, but that phrase struck me: “It’s only $50.” I thought to myself, she must not know what saving an extra $50 can do!
Just over three months ago, almost on a whim, my hubby and I decided to start putting a little extra on our student loans. It seemed like a small amount that would hardly make a dent in the huge sum we owed, until we really started looking at the numbers. You see, I’ve lately learned the value of what once seemed like an inconsequential amount and what a big difference it can make in helping you pay off debt faster.
Saving just a little money can change your financially situation drastically. Even just putting a few extra dollars per month toward your loans can cut YEARS off the payback period. If you have debt, paying a little bit extra each month can make a huge difference.
How to Pay off Debt Faster
Let’s say you’re trying to pay off a car loan: $5,000 at 4% fixed interest. If you continue making the minimum payment every month, it will take you another 4 years to pay off the loan.
If you find a way to save just $50 per month to put towards the loan, you can pay it off one year and five months sooner! (You can use this free debt calculator or this free downloadable spreadsheet to find out the actual debt pay off for your particular situation.)
In addition, you’ll save almost $200 in interest.
Plus, you’ll have freed up an extra $150 (minimum payment plus $50 extra payment) per month to put towards paying off another loan, saving for emergencies, or to help you become a stay at home mom.
Of course, those extra dollars have to come from somewhere. Recently, I shared 97 Easy Ways to Save Money. In the article, I also estimated the savings per month for each of the money saving strategies. They ranged anywhere from $4 per month to several hundred.
Saving that extra $50 could be as easy as dining out one less meal per month. Or it could be one less trip to the salon.
Even if you’re already living on a very tight budget like we are, you may be able to find ways to cut your budget for necessities like groceries and utilities. You could also make lots of little money saving strategies add up to $50 per month. (This is the simple system my family used to cut our grocery budget in half.)
So if you’re like we were and resigned to the fact that you’d still be paying your student loans when your kids were in college, think again.
Try to stop focusing on the total you owe or past decisions you’ve made. Just start somewhere! Even just a small additional payment each month can really add up. After all, it’s only $50.