My smallest student loan, Nelnet, is currently $2,800 (originally $3,500). In my head, this is such a small, insignificant amount of money that I should just be able to wipe out in one swoop, but alas, living on your own with bills makes this impossible. Compared to my $15,000 and $23,000 loans, however, this little guy is just a mild, $50/mo annoyance. Even so, it's an annoyance that needs to be paid so that $50/mo can go to my larger loans, which will accrue way more interest over time. To balance living expenses and loan payments, but still pay off Nelnet sooner rather than later, I set up a 30 week money challenge for myself and from the looks of it, I can expect it to be gone a bit earlier than 30 weeks.
So what's a money challenge? Basically, it's an extremely simple savings plan that will steadily help you to achieve an end set balance of an amount you choose. You start with a deposit amount and then continue to multiply that number to the deposit amount for each week. So if you start with $1 on week one, week 2 you will deposit $2 to increase your balance to $3, week 3 you will deposit $3 for a balance of $6 and so on. Generally, the payments amounts are very small and manageable depending on your end goal.
Since I wanted to be on the fast track to paying off this loan, I did a little math to put the amount of time to just 30 weeks. This meant I would start with $7 on week one and continually add $7 to the next deposit number to reach my goal of $3,255 by week 30 - more than enough to cover the loan + interest. Since I'm terrible at explaining this, here is my chart:
As you can see, my deposit amounts are a bit more significant, some reaching into the $200. Since I'm on a budget and usually have about $400/mo left over, however, these payments should not be an issue. I am currently on week 15, with a total of $840 already saved up. I cheated and actually started at week 8 with a $250 deposit, but I want to do what I can to speed up the process as much as possible.
To make the process smoother and keep track of my money safely, I opened an additional savings account at my bank. I now have a checking account, a savings account that is my emergency fund, and this new savings account for the money challenge. Having the account allows me to transfer the deposit money each week from my checking account without having to pay the bank a visit or get it from an ATM. Since I have a tendency to be lazy and put things off, this has been working wonderfully for me and I have yet to miss a week or "forget."
I encourage anyone, whether or not you're in debt, to set up a money challenge for yourself. You'll be amazed at how much you'll save by putting away a tiny amount each week that you would have otherwise spent on useless crap.