It was 2012 and I was drowning in student loan debt. I had just finished a my doctor of optometry program and found myself with $220,000 in debt.
Debt breakdown:
$190,000 graduate school loans [$60,000 Canadian student loans. $130,000 American student loans].
$10,000 undergrad debt (computer science degree)
$20,000 Credit card debt
As soon as I graduated I decided that after all of those years of hard work I deserved a trip around the world. I took two of my friends and went to Thailand. The trip ended up costing $2500.
So, there I was. Graduated without a job and in $222,500 of debt. I quickly applied to as many jobs as possible. In the Southern California area there were only fill-in positions available. They typically paid about $350 a day. Without paying taxes and working every single day it would take over 635 days just to pay that off. It was a bit discouraging.
I found odd jobs at Walmart and Costco about 1 to 2 times a week and realized I needed to change up my game.
Moving to Hawaii to pay off debt:
I got a job offer from my school’s job board in Hawaii. The weather sounded amazing and the possibility of having medical insurance/dental was too good to pass up.
When I flew out I had no idea how much money to ask for in the Job interview. My only other jobs I had in the past involved cutting grass or working at the local pizza joint. My then boss offered me 75k a year. It sounded like a good number to me. Probably enough to get an apartment by the beach and get a cheap used car.
I quickly learned that 75k a year, although it sounds like a nice figure, really did not go very far in Hawaii. Here’s what my paychecks looked like:
Pay: $2100 every two weeks or $4200 after tax a month
Rent: $900
Tithing: $420
Student loans (at 10 year fixed): $2367.88
Utilities: $150
Food: $300
Everything else: $62.12
The everything else included gasoline and trying to pay off my 22.5k in credit card debt.
Also, can you see something missing in this budget? Retirement.
2012 the stock market was starting to pick up again after the great recession. I desperately wanted to open a roth IRA so I could invest with time on my side.
My student loan interest was set at 6.75%. I reasoned to myself that it would be better for me to pay off my student loans than to invest in the stock market because I would get a guaranteed 6.75% return on my money. I thought about doing a side hustle. Perhaps I could work at the local gym. Maybe I could work at hotel at night. Night after night I came home exhausted from the new job and couldn’t motivate myself to get extra income.
I quickly found out that living in Hawaii on 75K with 222k in debt was impossible. I had to do something to turn it around.
I asked my boss for a raise. He said that instead of a raise I should try extending out my student loan payments to 30 years instead of the 10. I called the government hotline and they were happy to decrease my payment by $1000 dollars a month. It also meant that I would be 60 before they were paid off.
I watched as the interested on a 222K loan expanded each month. I couldn’t believe my eyes. The interest alone per month was: $1251.56!! That’s a new flat screen TV every month on just interest. Every morning when I went to work it felt like I was putting on a Sallie-mae name tag.
Over the next few weeks I’m going to write an article a week explaining how I became debt free. Please comment below and let me know about your financial journey.
I’m also going to be posting investment articles and ideas about how I could have done things better.