It finally came! Today is the day we got to do a major smackdown on those student loans! We’ve been saving up all month, since we couldn’t make payments while the transition from Edgeucation to Mohela was going on.
Well, the transition is now finished, and let me say I am shocked to say it, but it looks like Mohela has got their shit together way more than Edgeucation did! What?! I know. Mohela even sent us an email confirming our payment was submitted! Crazy!
Even more good news, my balance transfer for the loans went through just fine, so I don’t have to worry about all that money being lost in oblivion. We made the big payment this morning and damn did that feel AWESOME. We are now officially 80% paid on the loans we owe to the government! 80%!!!!
I am so happy with the progress that we have been making. Though, at the same time, Mr WWW and I have been talking a lot about the idea of lifestyle creep, and how we could be paying more on our loans if we hadn’t improved our lifestyle. Back 2 years ago when the loans were all first due, we had to scale our lifestyle back a ton, just so we could make the minimum payments. Now, our minimum payments are way smaller, and each month we are able to put a ton more towards the loans, simply because our income has increased.
But, even though the loans are getting paid off at a faster rate, we still spend more on fun stuff than we did 2 years ago. Many of our acquaintances think we are still obnoxiously frugal, because we don’t constantly go out to eat, or to the movies, or to the bars. And it is true that we are pretty exacting with what we spend money on. But at the same time, we are treating ourselves a little here or there, more than we would have in the past.
For example, Mr. WWW and I have a membership to a climbing gym. We found a way to get a huge discount on the membership, it is something that we love doing together, and it keeps us in shape. On top of that, we have a lot of friends with memberships as well, so it allows us to spend time with our friends without constantly spending money on eating out and movies, etc. So you can see that this was a very well thought out expense. We cover a lot of bases with this membership. But, it still is money that is leaving our bank account.
Another example is our residence. We could be paying a lot less in rent. We recently inherited a piano from Mr WWW’s mom, and we needed a bigger place to store the piano. I really wanted an apartment with an open floor plan, where the piano could be in the main room instead of in a bedroom. So, we are paying more than our last place for having this piano in our front room. I have to say, it is amazing. We play the piano nearly every day, and it is so much fun to have the piano in the main room when we have people over. But it still money that is leaving our bank account, and not going towards those loans.
Lifestyle creep is tricky, because it happens so slowly and gradually. I think it really is the determining factor of financial success in the long term, though, so we need to be careful. I think the pie graphs are helpful here. Our goal is to put 50% of our take-home pay into “Smart Money,” which is loan payments, savings, and investments. I think as long as we focus on keeping that at or above 50%, our lifestyle creep won’t be too bad. For example, we continue to maintain our 50% goal, even with our climbing membership and more expensive apartment.
What do you guys think? Is it safe to go off percentages of take-home pay alone? Or is it better to allocate a dollar amount for Needs and Wants, and then everything else goes to Smart Money? That way, as you earn more and more, you are only investing the extra money.