How I eliminated a significant amount of college debt
Debt payoff typically isn't easy. Many times, the first step is to take a cold hard look at your financial situation which is more than most can tolerate. In the end, however, you will be glad that you did.
Debt payoff is often a thankless endeavor because it mostly revolves around undoing a mistake. Being in debt means that the money was already spent. The bad decision was already made.
Conventional 21st century American culture informs us that we all should strive for the "American Dream". Yet most of our understanding of the American dream is violated by the pervasive images of cars, clothes, and material possessions from films and TV shows. Folks, this is not reality.
America is about freedom. Freedom cannot possibly be pursued to its' fullest if you are under a mountain of debt and financial obligations. Debt keeps you in jobs you hate. Debt is one of the leading causes of stress. Debt breaks up families and creates marital divide.
For Millennials, student loans are the spearhead of our credit crisis. Unaffordable rates for college tuition is readily subsidized by eager lenders preying on the young and innocent. Millennials were led to believe that the only way to "succeed" was by going to school. How well is that paying off for us?
We are left to watch those who have elected to go into trades and forego college beginning their lives with significantly higher levels of financial strength. They start families much earlier than college-goers. With a smart first time home purchase, they are able to avoid debt to an extent most academically-inclined students will never know. Those who avoid student loan debt have essentially given themselves many advantages that otherwise are unattainable for those who have received higher education.
Don't get me wrong, college education typically equates to higher salary and lifetime earnings (provided you find a job). But it is about what you trade in your 20's and 30's that is not easy to recover. If you spend most of your 20's and 30's paying off student loan debt-which is what most people are doing-you will have little energy and capital to allocate elsewhere.
Student loans are a difficult situation that is wreaking havoc on Millennials, as well as younger generations. This crisis can be averted however, even if you already have accrued a significant amount of debt. I must admit, it will take tremendous discipline and consistency to get yourself out from under your student loans.
Why Did I Have Nearly Six Figures In College Expenses?
The sad truth is that the $96,000 I mentioned is for graduate tuition only. If I added in my undergraduate student loans it was well over six figures!
I got to this amount because I pursued a terminal degree in my field (doctor of physical therapy). As a DPT, we go to 3 years of schooling, during which you are not supposed to work. Regardless of this policy, I chose to continue working full-time as a personal trainer. Being a personal trainer is actually quite a lucrative gig, but the hours are typically not that attractive. For 3 straight years, I had a highly irregular and demanding schedule. It was as follows:
Sound like fun? It was, but only because I knew what I was working for. To eliminate the need for carrying debt throughout my early adult life.
The truth about debt payoff
I am very competitive person. I turned debt payoff into a game. If you have a significant amount of debt, especially student loan debt, I suggest you do the same.
You have to game it out. You need to be aggressive. You need to be a machine. Become an "animal" in the process and set your sights on what needs to be done - debt payoff!
Debt payoff is literally the goal. Debt is the enemy.
During debt payoff, there should be little else on your mind. You need to get focused. Do the math. Find out where your money is going. Calculate your life energy and where it all goes.
If you want a very detailed, impossible to beat formula for how to calculate your real hourly wage, you need to read Your Money or Your Life immediately! This will help put your hours and dollars into perspective.
My success in paying off debt is actually due to Dave Ramsey's Total Money Makeover book.
After reading this book I understood how to become focused on the objective. The only thing that mattered was freeing up as much money as possible so that it could all be used to aggressively pay down this student loan debt.
Every extra dollar, whether it be cost cutting or selling shoes on Craigslist, needs to be contributed to getting this toxic debt out of your life once and for all.
How exactly did I pay off $96,000 of graduate school
Truth be told, I did pay for some of it along the way. I only had to take out less than half in the form of student loans.
For the exercise-minded folks out there, personal training can be a lucrative gig. In 2012 I was actually averaging a little of $30/hr as a wage. The lowest wage I got was from a health club making $12/hr, however having this experience on my resume allowed me to land some gigs as a personal trainer in a private studio paying up to $60/hour.
The cost of school was about $30,000 per year and I was making a bit over that.
However, at the time, I also had other expenses including but not limited to: insurance, utilities, groceries, cable/internet, phone, fuel, maintenance, and some miscellaneous expenses such as laundry, travel, occasional entertainment, and a few other odds and ends.
Notice what I did not have: car payments or housing payments. I did this on purpose to free up as much money as possible.
The way I was able to avoid housing payments is I stayed with my parents for 2 of the 3 years in graduate school. In the third year of PT school, I moved into an apartment where I negotiated an agreement to trade labor/maintenance on the building itself as a rent payment.
Move back home. Get a roommate. Negotiate a bartering agreement. Airbnb.
The way I avoided toxic car debt was I drove a '96 Toyota Camry with 200,000 miles that I paid for in cash. Get a grip. Unless you have extreme concerns about safety ratings for a family of 5, swallow your pride and drive a cheap used car. Period.
If you already have a new car or car payments, call the dealer immediately and see what you can get for it. Decide if the amount you get offered is worth cutting bait and getting out of that monthly payment to free up that extra 200, 300, or even $400 plus per month to hurl into that debt.
My final year of PT school I needed to take out loans because I was on my clinical rotations to finish my doctorate.
I borrowed $34,620 the final three semesters. I did not need to look this figure up. I remember it because it was a focus of mine everyday. It was part of my game. It was part of my life.
When I made that final payment I realized that I had the option to do whatever I wanted with the extra money that I was using to pay the debt. Of course, I also saw a dramatic increase my annual salary because I was a doctor of physical therapy at the end of graduate school.
What happens after the debt is gone?!
The choice is yours. Many people celebrate at this point. I didn't.
I chose to invest my monthly payments- that I was previously making to the school or federal lenders- into low cost index funds. Only 4 years later, I have a net worth (with my wife), of over $300,000 even with a massive correction in the recent financial markets (at the time of this writing, in 2020, the COVID-19 virus and shutdown is in full-effect and the markets are in a tumultuous downfall).
I am not special. My circumstance is not extraordinary.
We paid for our own wedding, in full. I paid for my entire undergraduate, in full. My wife paid for her schooling, in full. My wife even paid off a brand new SUV approximately 4 years ago.
We paid for a lot, by ourselves.
I remember my best friend telling me how much money I would "make" by having a wedding. What I did not realize at the time is that he did not pay for his wedding.
Remember, focus on yourself. Eliminate the outside stories that other people tell you because you have no idea what their circumstance is. You have no idea if they had houses paid for. Weddings paid for. Travel paid for. Honeymoons paid for. Cars paid for. We had none of those. We paid for all of those ourselves.
Why would I tell you this? To brag obviously. No, that's not actually why I told you this. I told you about my story because I want you to write your own, equally extraordinary and unique story for yourself. It can be done. Find a way.
Make extra. Save extra. Cut costs. Get creative with housing and cars. Take on a second, third, or fourth job the way we did. Remember, it only has to suck for a little while until you get this debt paid off.
Share your story in the comments below. Let us know if this motivated and lit a fire under your ass to do better and get more aggressive. I write for you guys. I am telling my story to motivate you.
This is certainly not professional financial advice nor do I know what the hell I am talking about. That said, look at my results. They speak for themselves.
Until next time...
I started this blog because friends and family often asked me similar questions regarding personal finance. I was surprised just how much people were interested in improving their financial situation, yet had no idea where to start. It made perfect sense to start a blog and share all the information that I have learned along the way with others. You will find many resources and links referred throughout the blog. I have found all of this information useful and continue to grow my knowledge and understanding in the personal finance space. Admittedly, even I struggled heavily in the beginning with understanding how to improve my financial situation. The power of reading and note taking got me where I am today and will continue to provide a return on investment for years to come. I look forward to sharing with you along the way.