This article is by Kassondra Cloos, an Earnest client and freelance journalist.
In the months leading up to my official payoff of $46,000 of student loan debt (including interest), I spent a lot of time daydreaming about how to mark this milestone. After years of pinching pennies and saying no to spending of all kinds, I would soon be making my last student loan payment.
Refinancing my loans with Earnest and keeping my debt-free goal top-of-mind helped me pay off the balance in September 2018, five years sooner than I had planned. Aside from the gift of financial freedom, I also saved myself thousands of dollars in interest.
Here are a few ways I considered celebrating my debt freedom, which you could also consider:
1. Throw a Debt Freedom Party
People get to throw big bashes when they graduate from college—why not have a party when you pay off your debt, too? You could make this celebration as simple or elaborate as you’d like; the only rules are to do something that you want to do, and to not go into debt throwing the party.
2. Take a Trip
What better way to celebrate gaining full control over your money than to splurge (responsibly) on a trip you’ve been wanting to take? Or, you could surprise yourself: one of my favorite ways to travel is to pick a set of dates, a hard budget, say $400, and then book the first flight deal that lands in my inbox matching those parameters.
3. Invest or Save Your Loan Payment Amount
Instead of increasing your living standards, take the money you otherwise would have spent on debt and invest or save it. Before you make decisions about how to invest that money, do some research so you understand how the risks might align with your goals.
If you’re saving for a far off retirement, you might start out with a more aggressive strategy; if you’re saving for a down payment on a house, your best bet might be a high-yield savings account that guarantees your money will grow.
4. Make That Life Change You’ve Been Dreaming About
Do you want to quit your job to travel, start your own business, move to a new city, or take some time off while looking for a new career you love? Now that you’re debt-free, it’s less risky to give up a steady paycheck in search of a lifestyle that will make you happier.
Or maybe you have wanted to invest in a gym membership or nutrition coach to help you live a healthy, long life, but couldn’t swing that cost while making student loan payments. Take what you would have spent on monthly student loan and debt payment amounts and instead apply it to improve your life in the long-term.
5. Make Someone Else’s Day
When I posted a question on Facebook seeking ideas on how to celebrate, two stuck out to me: One person recommended making a box of small extravagances, like a Starbucks gift card or movie tickets, and work with a college’s financial aid department to get these gifts into the hands of cash-strapped students who deserve a treat. Another suggested making a loan payment on behalf of someone else—a sibling, cousin, friend, or stranger—who could really use the break.
6. Donate to a Cause You Care About
Celebrate your own freedom by making someone else’s life a little easier, or by helping out an organization you love that could use the money. No amount is too small. One way to take this a step further is to set up a monthly donation with a charity. This helps organizations in the long-run, as they can more easily build a budget when they know how much is coming in each month.
7. Treat Yourself
Set an amount—say, $100, or one or two month’s worth of payments—and treat yourself to something you’ve said no to over the years as you’ve paid back your debt. Maybe it’s a massage, a new outfit, a new couch, or a nice dinner. Whatever it is, make sure it’s something you really want. And of course, don’t go into credit card debt to make it happen.
So what did I pick for myself?
In the short term, I’m saving as much as possible toward a down payment on a house. But I plan to eventually treat myself to a vacation costing $1,000 or less—a rough average, rounded up, of what I spent on student loan debt each month.