I will readily admit that luck played a significant role in bulking up my financial avatar. I attended a fairly decent law school and interviewed with firms in 2008 before the worst of the recession hit. My firm gave me a big check and a deferral year instead of a pink slip in 2009. Still, the post-graduate degree came with a hefty price tag, and by the time I started working in October 2010, I owed roughly $95,000.
As much as luck helped with securing a good job, I still made choices with an eye towards paying down the debt as fast as possible. I dubbed this project “Operation Get Rid of That Debt, Man.”My strategy was to embrace thrift and to give the bank as little of my hard-earned money as was possible. I boiled it down to this equation.
Income – Expenses = Capital
The more capital I could accumulate, the quicker I could pay down my loans.
Thrifty on the big details
Most of my friends decided to start their legal career in New York or California, but I chose to settle down in Chicago. Chicago was a big enough city to get the big law starting salary ($160,000), but the numbers on life’s price tags — rent, food, transportation — were more reasonable. By choosing Chicago, I also avoided paying the New York City income tax on top of my state and federal taxes.
Most people’s biggest expense is their rent. In Chicago, I could afford a sunny 2 bedroom, 2.5 bathroom apartment for $1500 per month. By getting a roommate, I cut that down to $750 per month and we split all the utilities. Big cities on the coasts will force you to pay three times as much for less than half the space.
Chicago also let me get rid of my car and ride public transportation or my bike everywhere I wanted to go. The aforementioned apartment’s location was nothing short of ideal. 17 minutes via public transportation ($80/month) or 20 minutes on my bike (free) would get me downtown and sitting in my office.
Thrifty on the necessities
Lady luck also blessed me with two older sisters with professional jobs and a similar figure. Their gifted hand-me-downs populated most of my wardrobe and the few pieces I bought that first year did not total more than $100 altogether.
I brought my breakfast and lunch to work most days. When I worked late, my firm paid for my dinner and a cab home. The firm also had a free gym and free personal trainers.
I put my favorite form of entertainment (traveling) on hiatus. I did not go to any movies. I did not buy any music or books. I went out to eat and for drinks with friends because I still had to exist and I needed some form of entertainment, but almost never more than a couple of times a week.
I kept about $4,000 (a few months of expenses) in my checking account for breathing room — the “emergency fund” that everyone should have. Each paycheck, I would calculate how much I would need for the next month’s bills and then I would gleefully make an additional payment to my student loan debt with the excess the very day I received it. I put up to 85% of my net income towards this Operation. My bonus, my tax return, every extra cent went to maximizing that percentage. I was obsessed. At any point, I could tell you exactly how much I had left to pay down to the penny. I calculated and recalculated payoff dates and how much interest I would pay to the bank. I may have cackled a few times.
And then I bucked the typical personal finance advice. One year later, almost to the day I started my legal career, I (nearly) emptied out my bank account and spent my “emergency fund,” to pay off my last student loan with a not-horrifying interest rate of 5%. I declared myself debt-free and danced a jig.
The stressful job was infinitely more tolerable. I was no longer afraid of getting laid off and having a large student loan payment hanging over my head. The process wasn’t rocket science and it was a stressful year, but it was absolutely worth it when I could say that I was debt-free. Crossing off Operation Get Rid Of That Debt, Man still ranks in my top ten favorite moments.