Degrees with Debt: How I paid off $27,000 in Student Loans in 2 years

After high school, I never REALLY knew what I wanted to be or do. Does anyone, really? I did know one thing. I was going to college! My older sister was the first person in my immediate family to receive a bachelor’s degree, and later a Masters Degree.  Being the competitive little brother I am, I went out and chased the same goal. Fast forward a few years, I’m walking across a stage about to accept a degree that cost me approximately $30,000. It didn’t take long until I began to feel the weight of that $30k. Unfortunately, that didn’t stop me from adding the final piece of the puzzle, a $13,000 car loan. Uh-oh I needed a plan! I had previous knowledge of Dave Ramsey’s Baby Step Program and I used it to pay off $27,000 in 2.5 years making $37k – $56k. I used several strategies to accomplish this (See graph below).

Graph of my debt journey starting January 2017

The following post is a documentation of expenses and hacks that I used to eliminate a large amount of my student debt. For 2.5 years these three strategies worked for me, and I hope they work for others too. 

Strategy #1 – Housing

Housing is the most expensive line item in the average American person’s annual budget. I knew that if I found a way to slash housing cost, I would be catapulted towards debt freedom and financial independence (Fi).  While I’m not as extreme as some who would suggest strategies like living under your mother’s kitchen sink to reduce housing costs, I do believe housing costs should be reduced significantly. Especially after living in China and witnessing families of 6 (Mom, Dad, Grandma 1, Grandma 2, Kid 1 , Kid 2) not blink twice about living in a two bedroom apartment.  Still not that extreme, but here’s how I did it (yes my mother is involved). 

What happens when 6 people live in a 2 bedroom apartment you might ask?

After graduating college and starting my first job, I was still living in my parents home. I had two options: I could get my own apartment, or I could continue living at home at a fraction of the cost. I chose the latter, and paid only utilities while living at home. Of course, living in your childhood home with your mom, sleeping on your ninja turtle sheets, and doing the same old chores, takes some mental adjustment. All I have to say is one word…SACRIFICE. During this time I was living in Atlanta, GA. If I were to rent an apartment in a similar area, I would’ve paid $800. Living at home, I paid an average of $300 in utilities every month. That’s a savings  of $500/month (or $6000/year). Plus a few free meals here and there. 

Six months later my older sister told me she was buying a house and asked me to live with her. She offered me the same deal. I would pay no rent, just the monthly housing utilities (gas, water electricity, & internet). I jumped at the opportunity to have more freedom, more privacy, and more independence away from my parents home (sorry mom). Plus, the area where she purchased her home was “closer” to work (unfortunately everything in Atlanta is an hour away). 

Living with family is how I slashed my housing cost in half. I built stronger relationships with my family and saved a ton of money. 

Strategy #2 – Car

The second largest expense in America is transportation. Another thing that completely blows my mind after living in China. You mean I used to drive my own car? Unfortunately, when it comes to transportation I  think I just managed to keep my head above water. I am thankful to have the prior knowledge to avoid making an even larger mistake (aka – buying a brand new car).

I wish I could say I had a story of driving a “$1000 beater”, but I didn’t. In 2015, my new job required that I drive a car that was “7 years old, or younger”.  At the time, I was driving my trusted 1994 Honda Accord (You do the math). I drove the Accord through high school and college with almost 250k miles. Even with the high mileage, I never had any MAJOR repairs to worry about. Although, I do remember having to change a $40 thermostat in my college dorm parking lot. I’m sure my girlfriend can also remember trying to survive a Georgia summer without A/C. Unfortunately, I felt I needed something a little more reliable and my job just gave me an excuse to spend more money. 

I was compensated with a $450 car allowance and 15 cents per mile. The hunt was on! After a couple of months of saving a small down payment I searched for the perfect vehicle within the following parameters: price, quality, and age. Honda was always good to me, so I knew I wanted to keep it in the family. Eventually I settled on a low mileage 2012 Honda Civic that cost approximately $13,000. Did I have $13k in cash? Of course not. That would be ‘too much like right’. I went to my trusted bank and withdrew my first, and last, auto loan. The car didn’t kill me financially, but I hated having a car payment while sporting a negative net-worth.

Fortunately, when I left for China I was able to sell that car and pay off the remaining balance of the loan. Now , I live a life without a car, and I have to admit, I never realized how expensive cars really are. Even after reading Mr. Money Mustache’s “The True Cost of Commuting”, there is nothing like actually living the savings.  Keeping my transportation cost minimized was another way that I reduced my debt.

Strategy #3 – Side Hustles

Working additional jobs on the side gave me the opportunity to put even more money towards debt. I also have to admit, making money outside of your full time job is actually kind of fun. Maybe I’m crazy. It didn’t take long to realize that my full time job couldn’t be the only way to make money. I ventured down the usual side hustle rabbit hole, and started exploring the gig economy (aka – I drove for Uber & Lyft). Although ride sharing is a great way to make a quick buck, it wasn’t the most lucrative business. My next venture was the world of E-commerce and refurbished goods (aka- I bought stuff at yard sales and put them on Ebay). To this day, I believe this is the easiest and most exciting way for someone to start a small business. At its height my little eBay business churned an additional $2k of gross revenue per month. I gifted my business to my mom, before moving to China and to this day I still get notifications about playing cards I bought at an Estate Sale in rural GA. 

Reducing my housing expense, buying a reasonable car, and side hustles are all strategies that I used to reduce my debt. My battle with debt is not over and I hope you can stick around for the grand finale. Please feel free to comment with strategies you use to eliminate debt. 

 

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