“You dropped $150,000 on an education you could have gotten from $1.50 in late charges from the public library.” -Matt Damon in Good Will Hunting
Like most 18 year olds entering college, I really believed in the American dream. I knew that if I took out the loans in put in the time in my school work, then all that hard work would pay off. Ask any one today if college is a good idea and they’ll almost always say yes. For the last seven years I’ve been plagued by my enormous student loan debt, and I’ve gotten to the point where I’m tired of being tied down by debt. For the next 36 months, I’ll be on a quest to be completely debt free.
Hypothesis: For me, debt or the pursuit of money has influenced most of my career decisions. When I was younger, I always envisioned myself as some great scientist or explorer. Reality set in and I chose a more “practical” career in marketing. When faced with what career path will I take next at the end of my Navy enlistment, I decided that I wanted to make a career choice not based on money. I believe that eliminating debt from my life will allow me to pursue passions and interests free of concern for income.
Ending Wage Slavery
I think more than anything else, a career in the military has thought me how to be grateful and learn to appreciate the small things in life. I went from having a well paying job as a Marketing Manager with a nice high rise apartment in downtown Houston to cutting my income in half and living aboard a ship with hundreds of other sailors. Ironically, I have more savings and less debt now, even though I earn less. Over the last four years, I’ve learned to cut out expenses and really focus on what’s important. Here’s what I’ve done so far:
- Eliminated Owning A Car – At about $8,000 per year to own a car, this is most people’s second highest expense. Consider costs such as registration, maintenance parking tickets, gasoline, insurance and car payments and they really add up. What do you really need a car for anyways? With every place I’ve lived, I’ve always looked for a place near where I work and eat that I can get to by walking, riding a bike or taking public transportation. If I need to get somewhere quick, I can always take a cab. I probably spend about $50 a month on ferry, bus and taxi fees or around $600 per year. I could probably spend even less if I only chose to walk or ride a bike.
- Eliminate My Cell Phone Bill – Over the past two years, I’ve spent $113 on prepaid Tracfone minutes. Considering that prior to this I was paying $90 per month for an iPhone, I saved about $2,000 over this time. I’ve been able to do this by using Google Voice to make and send an unlimited amount of phone calls and texts via the Internet and forwarding those calls to my prepaid phone when I’m outside of my home. I could actually spend no money at all on a phone if I didn’t care about staying in touch with people.
- Automate Savings & Debt Payment – One of the biggest changes for me financially was automating my bill payments and savings. I no longer have to think about when my bills are due or how much I’m going to pay on them. It turns out that my banks bill pay service is better than me at making financial decisions. It knows that when a bill comes in that I should pay it in full before it’s due date. Also, if I want to save for a goal, all I have to do is decide when I need the money and set-up automated withdrawals over time. Rather than use credit to buy things, I use automatic savings plans to save for what I need.
- Shop At Thrift Stores For Clothes & Household Goods – Thrift stores and consignment stores are amazing places to find clothes and other items you might need for your house. When I moved to the apartment I have now, I decided to completely furnish my apartment with donated or thrift purchases. I spent about $200 to furnish my entire one bedroom apartment. Consider that most people spend thousands of dollars on furniture alone this was a huge savings. Most of my furniture came from my neighbors who were just throwing out perfectly good couches, desks and chairs.
- Re-enlist In The Navy – After some serious soul searching and an open mind, I decided to re-enlist in the Navy for another 3 years. Unless the government decides to cut all funding to the military, I’ll have a job for the next three years. Plus the chance to fulfill my dream of living aboard. Korea here I come!
Accelerating Debt Payment To 55% Of Net Income
Starting this month, I’m upping my student loan payment to from $1,000 (the minimum payment) to $2,000 or 55% of my income after taxes. This idea of devoting such a large portion of my income to debt repayment came from the book, Early Retirement Extreme by Jacob Fisker. In the book, Mr. Fisker advocates the idea of saving at least 75% of your income to allow anyone to retire in 5 years or less. For most of us, 10% is the most we’re willing to save which leads us to work for 40 to 50 years to save enough to retire. For me, retirement is about being free from debt. If we can free ourselves from monthly financial obligations, then the cost of living is negotiable. With out payments to worry about, we are more free to pursue our passions. Eventually, I may increase my payments, but now at 55% have plenty of money to live comfortably and do all the things I enjoy doing.