Well, this is awkward. We just made a decision that is going to change our financial plan forever.
We feel like such hypocrites. For 6 years we’ve been slogging away at our student loans, throwing as much money at them as we can each month in order to become debt free. We’ve championed the virtues of frugal living to our friends and family, and in July 2016 we even started this blog to bring our views to the masses.
Our plan had been to live frugally, keep expenses small, keep loan payments big, and get out of the student loan vortex ASAP.
Did we just ruin it all?
I read an article recently by Live Free MD, via the White Coat Investor. It was about Financial Indpendence being a continuum, not a specific number. In other words, it’s not something you reach all of a sudden; as your portfolio grows your goals should grow with it.
I like Live Free MD’s philosophy on money, and you should head over to his blog if for no other reason than to read about how he paid off $400,000 in debt in a few short years.
His post on Financial Independence being a continuum was a fun read that laid out fairly specifically his goals at different stages of his net worth. He is absolutely dedicated to reaching FI, and it was interesting to see how he laid out specifics for what he would do at each stage, especially in regards to how much vacation he would allow himself if he was at $0 net worth vs. $500k net worth and beyond.
One decision we made (albeit a little late) in regards to our careers was to leave the bright lights of the city and move to a more rural location. When our early jobs weren’t working out the way we wanted them to, we made a choice: Go where the money was.
What we gained with the move was an instant rise in income (that has continued to go up) in exchange for living somewhere that others may see as less than desirable. Obviously, there are a lot of downsides to living “in the sticks” as well, but I feel that those have been hashed over plenty of times in pop culture and the mainstream, so I won’t delve into them too much, at least not today. This is a Rural-Positivity thread!
Saving money on stuff really isn’t that hard. Honestly, it’s not. It’s a matter of looking at what you’re spending money on, deciding what matters and what doesn’t, and cutting out the stuff that doesn’t. It’s not a magic formula, but it takes a little introspection and some discipline.
Some things aren’t really optional. Life and disability insurance, rent or a mortgage, food and utilities; these are things that you really can’t live without. There are certainly ranges of costs that you can choose from in those categories, but the bottom line is you’re going to spend some money on those things because you have to.
It’s the other things in life – the vacations, the dinners out, the entertainment – that are harder to reduce or eliminate, because we just aren’t wired to give up things we like. Still, grown ups have to make tough decisions sometimes, and we did that when we decide to cut the cord (and yes, I realize that giving up cable is not a life or death decision, but still… it was tough for us!).
Having a child changes your perspective on things, as every parent knows. Recently, I’ve been thinking more about the advice I’ll give once my kid starts talking about what they want to be when they grow up.
A common response I hear whenever this question is posed (by someone of any age), is “Do what you love.” In a perfect world, that is absolutely the best answer. It’s the answer I’ll give when my child is young and lives life with no preconceived notions of what’s possible.
The reality is, as idyllic as it may be, doing what you love isn’t always the prudent decision. When you’ve got bills to pay and loans to honor, the first thing you need is a paycheck. Maybe that sounds harsh, but it really shouldn’t. It’s just the fact of the matter.
In my last post, we went into some pretty specific details about why I feel that Dave Ramsey’s financial plan doesn’t work for high-debt young professionals. One of the big issues I have with it is that it doesn’t call for any retirement investing until after your student loans are paid off. I think this is the biggest flaw in Dave’s plan, and as much as I love his work and have been personally inspired by him, this point deserves some deeper inspection.
I know what that post title sounds like. You’re thinking, “Here’s another entitled Millennial, complaining about how tough life is.”
I’m going to make a statement right off the bat: Dave, if you’re reading this (verrrrrry unlikely, but just in case), let me just say that there is no one that I need to thank more for getting me interested in personal finance. I know that the title of this post is a little harsh, but it’s really not meant to disparage how good Dave is at what he does. In fact, I’d go as far to say that when it comes to inspiring people to learn about their finances and encouraging them to get out of debt, nobody does it better. It’s a noble mission he’s on, and he’s helped countless people improve their lives through his programs, including me.
Most things in life worth doing involve periods of excitement, fulfillment, and happiness, punctuated by moments of terror and self-doubt. Paying off a ginormous loan is no different.
I’m totally guessing here, but I would say that about 90% of the time, we are perfectly happy and content with our student loan repayment plan. We see the forest for the trees, so-to-speak, and always try to focus on how we assume we’ll feel at this end of this journey. Even when we get frustrated from time-to-time about how strict we have to be with ourselves when it comes to spending money, we usually can still keep our eyes on the prize and focus on a debt-free future.
It’s almost impossible these days to go on any personal finance blogs that discuss student loans in depth and not see articles/ads/links on refinancing. There are several major student loan refinancing companies right now that are starting to have a large presence online, but newer companies are popping up every day as well. Especially for people that graduated with similar debt to that which we have (interest rates in the 6-8% range), refinancing is almost a no brainer.
In mid-2015, we were starting to feel pretty good about our financial situation. We had been practicing in our respective health professions for about 4 years, our incomes had risen significantly, and we were beginning to see progress in our student loans being paid off. Still, we didn’t have a real plan for what we were doing; we paid more as we got it, but there was no real rhyme or reason to the choices we were making. We thought that needed to change.