I used to be blind, deaf and dumb.

It started the day I took out my first student loan, and I didn’t recover until about a year after I graduated.

The cause of my condition?  Realizing the grand total of my student loan debt, $30,000, which intimidated the hell out of me.

When people asked me about my debt or tried to give me advice it made me cranky on the outside and nauseous on the inside.   All mail that came from my lender ended up hidden the bottom drawer of my desk.  I had a million questions about my loans and what my options were, but I was afraid to open my mouth.

If you’re like I used to be, I totally understand.   Having a big chunk of student loan debt is scary and the way you’re feeling is normal.

That said, it’s time to stop feeling sorry for yourself and get on the road to recovery!

Watch

Set up your account with your lender’s web site so you can keep track of the balance, your payments, interest rate changes, and anything else having to do with your loans.

Also, carefully  read all mail the your lender sends you.  You never know what envelope might contain important information.

Listen

All advice is not good advice, but when people who have been in your situation speak, you should listen.  No one knows more about getting out of debt than someone who has just done it, who understands the terror and frustration of having debt that is more than your annual income.

If you encounter someone who is kind enough to share their experiences with you, be open-minded.  Find out what mistakes they made and what they wish they had done differently.  Ask what repayment strategies were effective.  If you get nothing but encouragement, it’s still worth your time.

Don’t solely lend your ear to people you know personally.  The Internet is a great tool for gathering information and tips.  Take a break from Facebook for five minutes to educate yourself about your student loan debt.

Speak Up

If you don’t understand something about your loan, pick up the phone and call your lender!  Hiding in your shell like a scared little turtle is not only pathetic, it can really hurt you in the long run.  Knowing the ins and outs of your situation will enable you to plan effectively and avoid potential problems.

Don’t be embarrassed to talk about your debt in public, either.  A majority of Americans have some type of debt, and with the recent economic climate being so sour, debt is no longer a taboo subject that should be kept hidden.  You’re not the only one!

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“I am fast.  To give you a reference point, I am somewhere between a snake and a mongoose.  And a panther.”  -  Dwight Schrute, The Office

Patience is not my forte.  I like to get things done yesterday, and it’s in my nature to want to get everywhere as fast as humanly possible.  My attitude toward my debt is no different.  I’m in a hurry, so heaven help anything that gets in my way!

Unfortunately getting out of debt is more of a “slow and steady wins the race” type of game.  I’ve learned that I can’t keep the pedal to the metal 24/7.

Like the open road, there are going to be setbacks on your debt journey that you can’t plan for or avoid.  There’s also happy accidents and lucky breaks.  What’s important is your reaction.  How well you’re able to shift gears when conditions change will affect how smooth your debt journey will be.

Middle Gear

Everything is smooth and easy, with no bumps in the road.  No surprise expenses pop up and income is steady.  All planned payments are  made on time, in full.  Not exactly flying down the autobahn, but making moderate progress and staying on schedule.  Think: cruise control.

Low Gear

Hit the brakes.  When s@%* happens and I’m forced to divert some money elsewhere, my progress slows to a crawl.  I know occasional setbacks are inevitable, but I still get frustrated when I planned on making a $425 payment, and I can only come up with$300.  Are we there yet?  Serious road rage pending.

High Gear

We covered slow and moderate paces, leaving the best for last: STEP ON IT!  When I come up with some surprise cash, whether it’s by additional income or unexpected savings, I’m burning rubber with extra payments.  Green lights all the way!

Regardless of which gear you’re in right now,  keep moving forward.  As long as you’re not in reverse, everything is okay.  Stay focused on your goals and remember you’re not alone.  We’re all on this road together!

Have you hit some bumps in the road recently?  Maybe you’ve run into some good fortune?  Tell us about it!

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An emergency fund is money set aside specifically for unexpected expenses, so you can avoid incurring additional debt.

Think You Don't Need One?

"I don't need life jackets on this boat.  I'm fine!  I took swimming lessons when I was 5!"

Yeah, you're fine, until you hit your head, or the waves are taller than you and there's no lifeguard!

S%&t happens.  You could lose your job, break your leg, get sick, have car trouble, come home to a flooded basement, etc.

Why Do You Need an Emergency Fund?

1. Prevent Additional Debt

For our purposes, this reason tops the charts.  If your goal is to get out of debt and be financially independent/stable/thriving, the WORST thing that can happen to you is having to take on more debt.  Tragic!  Unnecessary!  Yet so common.

2.  Protect Your Quality of Life

Isn't that the reason we're all working so hard in the first place?  Unless you're Paris Hilton and everything had been handed to you since age zero, you're grinding away to improve your life.  You might not be far along relative to your dreams, but I'm sure you don't want to slide backwards down the mountain either!

Having an emergency fund can buy you time, and give you the ability to hang on to what you've accomplished thus far.

• Not going into default on your debts?  Check.
• Not losing your house/pet/car/mind?  Check.
• Not losing your job because you can't get there anymore?  Check.
• Not adding another heaping helping to a debt balance that you've just FINALLY started making a dent in?  Double check!

3.  Peace of Mind

My car is not a junker, but it's not a spring chicken either.  Every day I wonder when it's going to bite the dust.  Now I'm not saying it won't totally SUCK when that day gets here, but at least I'll be ready and not choosing between transportation or shelter.

Having a emergency fund, a real emergency fund, can be incredibly comforting.  We're young and in that stage of life where things are constantly changing.  With so much to think about, don't add the risk of impending ruin to the queue.

4.  Good Habits Breed More Good Habits

Discipline is required to build and maintain an emergency fund.  Not cashing it out every time you see a pair of cute stilettos at DSW, or maybe contributing to it this month, but not next month or the month after bc you had a few too many at Bar Louie these things take will power.   If you can buckle down and get the job done with your emergency fund, the idea of handling your other financial obligations won't seem quite so daunting.

How Much Should You Save?

This is an impossible question for me to answer.  The right answer for you depends on several variables.  Here are a few things to think about:

How much are your average monthly expenses?

How readily could you find alternative employment/income?

How reliable is your support system?

You need to come up with an amount that works for you.  I've heard financial "experts" recommend anywhere from 3 months of total expenses to 12 months.

Hard to say exactly.  For me, the comfortable number is 6 months.

Where to Stash Your Cash

Your emergency fund should be:

1.  Liquid

Put your fund in an account that can be accessed quickly.

2.  Reliable

Playing the stock market or having it in your Bodog account probably (and by probably I mean DEFINITELY) is not a good place for your emergency fund.  This is money you need to know for a fact will be there for you 24/7, not only when you're on an upswing.  Choose a bank with a good repuatation, that is "member FDIC," etc etc.

3.  Separate

Keep your emergency fund in an account that is separate from your day-to-day money, so you're not tempted to meddle with it.  Remember, it's for real emergencies only.  We're NOT talking about when your favorite team makes it to the National Championship and you HAVE to fly to Tempe/New Orleans/Pasadena and buy tickets/face paint to see the game.

Don't Forget to Replenish

Hopefully you'll never have to touch that emergency fund, but we all can't be that lucky.  If and when you do deplete some or all of your emergency fund, get back to work at replacing that money right away.  Better to have an umbrella on a sunny day then to get stuck in a thunderstorm without one!

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Taking a chance on something new, royally screwing it up, and then figuring out how to mop up the nasty mess is an effective, albeit painful way to learn.

 

At some point we all go through the trial by error ringer.  The humiliation, immediate trauma and long term side effects of a huge "oops" are usually more than enough to etch a lesson into our brains.  The bright side is that once you've figured out what not to do, not only can you avoid making the same mistake twice, you can save others from the same pain by sharing what you've learned.

 

DebtKid.com is the brain child of a 20 something man with an incredible story of failure followed by a long road to redemption.  Once a day trading addict who piled up over $300,000 worth of debt, this site chronicles his quest to be out of the red.  His epic comeback has involved some drastic tactics, ie: living at his office  to save money on rent.

 

His posts are incredibly candid and devoid of excuses.  Past mistakes notwithstanding, it's impossible not to root for this guy because he is going all out to make things right, and that includes paying back family members whose money (we're talking in the thousands) he lost.  Not only does he share his financial life with us, but also lets us in on how his personal life has evolved.  Going from a single dude out get rich quick to a grown man with his head screwed on straight, a successful career (with side projects) and a beautiful fiancee, it's all there in his blog.

 

Aside from intrigue and inspiration, this site offers a boat load of practical ideas for speeding up the debt killing process.  Nowadays there are multiple contributors in addition to the original "DebtKid."  With different backgrounds and perspectives, they each add value and personality to the site, not to mention information about different forms of debt.

 

This blog is best consumed by starting at the beginning.

 

http://www.debtkid.com/

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Happy 4th of July!

My plan for the long weekend?

Relax!

Eat good food, drink good drinks, soak up the sun, and take in some fireworks.

Perfect.

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