Having debt on your shoulders is a major psychological burden, dictating what you feel you can and can’t do, forcing you to stay in a job you don’t like, and generally thwarting dreams and plans. If you have debt, you know what I’m talking about. I’m here to tell you you don’t have to live in the shadows of this burden, and hopefully my story will give you some insight into how to kill your own debt.
In June of 2012, before reading MMM, I already knew I wanted to pay off my student debt. Of $30,000, I paid $8,000 out of pocket (my entire savings), to set me on the right track. I was committed, but how was I going to pay off the rest? My savings were gone, I had bills to pay, a mortgage on a two bedroom townhouse, a rad motorcycle, a pretty sweet looking Jeep, a weakness for Lulu Lemon pants and lattes, and all I wanted to do was keep on traveling. On a teacher’s salary.
We’ll have to begin with a little background info on how I was able to kill the debt in one year, as the title suggests: The previous year, I had looked into buying a one bedroom condo for $155,000-175,000, but had a nagging feeling it wasn’t the best idea, and went with a much more expensive and larger townhouse instead, maxing out my loan capacity. On the surface, that may have seemed like a really bad idea, but I could afford it on my own if I was careful. Besides, I had zero intention of paying it myself, especially in a city where finding renters is so easy. I rented out the spare bedroom fully furnished, cutting my monthly mortgage in half. I didn’t even have a week long gap between renters. And best yet, some of my previous renters are now my closest friends. When traveling, I rented out the entire house. Yes, I’d have to share my kitchen, but was I willing to pay an additional $800 a month for the luxury of privacy, when I liked these people anyway and enjoyed their company? No way. And had I wanted to, I could have rented out both bedrooms and gotten a small apartment for myself instead of sharing.
Suddenly, I was the proud owner of a beautiful townhouse and only had to pay $1,000 a month for it, and I was building great equity at the same time. When I decided to pay off my whole student loan in just one year, I converted my garage to a bedroom as well. Did my car really need its own huge room?? Did I really need a place to store my motorcycle and random JUNK? I picked up a small shed for the tiny backyard, sorted through my stuff, and kept only what I needed or really wanted. I’d look at something and think, “What am I willing to pay to keep this item in my life?”.
The cost of the new bedroom was a pretty penny as I didn’t have the time to do it myself, but it paid itself off in a mere 6 months. If I were handier, wasn’t working extra hours already, or had the time to learn to do it myself, I would have done it alone. In the end, the math just made sense to get it done professionally and start renting out the 2nd bedroom as quickly as possible. I used the extra money I was making by teaching an after-school Spanish class to pay for the conversion, and a month later, I had both upstairs bedrooms rented to two great people. Suddenly, I was living mortgage free in a beautiful new bedroom. That’s right, mortgage free in my own home, while my house increased in value dramatically. I still paid utilities, but that was a drop in the bucket compared to mortgage, insurance and PMI.
I made many other changes, like selling my Jeep shortly after (Yes, I made some bad decisions before I wised-up. Just Empty Every Pocket is right). That alone saved $200 in gas per month (at a minimum), plus $75 in insurance, not to mention the cost of maintaining that outrageous monster. I sold my trusty Honda Shadow 750, and bought a motorcycle I could use year-round (I’ve now bought a cheap little motorbike for my Australian adventures that will sextuple my fuel efficient from those Jeep days, although I generally agree with MMM that motorcycles are a waste of money.
I began riding my bicycle in January of 2013, a very frigid and wet time of year to start bicycle commuting,
but it was an all-out attempt to pay off those loans. Turns out, I loved bike riding! I didn’t waste money on fancy bike gear, save for a powerful but cheap set of lights and a bright yellow jacket. I had previously traded a vacuum cleaner for a nice set of panniers, which came in very handy, and had my boyfriend teach me some basic bicycle maintenance skills.
I also started watching my daily spending very closely, especially my grocery and coffee bills. I got a free bread machine and used it religiously, instead of buying the expensive bread I was used to. I lived off a portion of my salary and the extra cash I was making by private tutoring after school.
Everything else went towards the debt.
On June 1st, 2013, exactly one year after making it my goal, and 6 months after becoming a “Mustachian”, my loan was paid off. I even had enough left over to take a heritage trip to Finland over Spring Break, as that Travel Bug just wouldn’t leave me alone. As always, I traveled frugally by staying with couchsurfers, making my own meals, and by not being a tourist sucker.
I was free of a huge burden, and happier and healthier for it.
Do you have school debt? What can you change in your life to kill that loan?