Day 214 | $90,717 paid | $0 till freedom

On August 29th, 2011, seven months ago to the day, I went online to check the balance of my student debt. I graduated from Harvard Business School with my MBA and $101k of student debt in May 2009 and I had made 21 monthly loan payments of $1,057 since then. I was expecting to see a balance of around $80k or so.

I had failed to take interest into account; the balance actually stood at $90,717.

Feeling trapped, I challenged myself to pay off my student debt within ten months.

I had no idea how I was going to do it. I didn’t have a huge stockpile of cash, my 12-month salary after tax was less than the balance of my loans, and the ten-month timeline was completely arbitrary. I had a mortgage on my house and two cars and a motorcycle, and I had become accustomed to spending $1,300 per month on entertainment. I wouldn’t say I was living above my means, but I certainly wasn’t living below them, either. And other than maintaining a six-month Screw You Fund, contributing 10% of my paycheck to my 401k, and making sure I could pay off my monthly credit card balance, I wasn’t thinking much about my financial future.

So with no good ideas about how to proceed with the challenge, I put almost all of my life savings towards the $91k. It barely made a dent. Needing to do more, I decreased expenses and increased revenue.

During the past seven months, I haven’t gone on a single dinner date or been to the movies. I took a flask with me every time I went out with friends, I stopped contributing to my 401k, I didn’t go home for Christmas, and I missed my friends’ bachelor parties and weddings. I got better at DIY and figured out things like how to use duct tape to repair my car and zip-ties to repair my house.

In the past seven months, I haven’t bought a single article of clothing or a single “must-have” gadget or gizmo. I’ve completely eschewed consumerism, and it actually felt pretty good.

To make extra money, I rented my spare bedrooms to strangers on Craigslist, I tried pedi-cabbing, and I started a landscaping business.

I sold my second car, my motorcycle, my roadbike, and a bunch of random junk on Craigslist. I got rid of things that I thought I could never live without, and it actually felt pretty good.

I’ll admit that I did feel a self-described (and self-induced) “funk” from time to time, and I became frustrated when my standard of living dipped a bit, but my cost of living dipped disproportionately more, and I ultimately found that life can still be beautiful without spending a lot of money.

On Day 17 of the challenge, I made the comment on this blog that the only other time I had ever felt this alive was when I was a student-athlete rowing on the crew team at the University of Michigan. 197 days later, that comment is as true today as it was then.

And today, on Day 214, I submitted a final payment to the Federal Student Aid website to pay down the last of my debt.

It Wasn’t Rocket Science

While flasking it up and skipping out on Christmas were effective ways to decrease expenses, those activities were merely the product of internal and external forces.

Internally, there were the standard ingredients like commitment, patience, and discipline.

Externally, I think the blog itself was actually quite effective in helping me achieve my goal. I can literally count on one hand the number of times I’ve ever flaked out on anything in my life, and while I complained from time to time about how uncomfortable it was to relive moments from especially difficult days by writing about them on my blog, I believe that making this challenge public was helpful to my follow-through. I’d say that the Hawthorne effect was probably alive and well throughout this challenge.

So I’ll take this opportunity now to thank those who commented on my blog. To have complete strangers in my corner right there along with my friends and family was incredible. At first, the attention and the rally cries and occasional criticisms posted in response to my write-ups were a little overwhelming and created a lot of unwanted pressure, but I eventually came to value the feedback, and the overall support was really just another important factor that ultimately helped me meet this challenge. So thank you very much for your encouragement and engagement!

I’ll admit that luck also had a lot to do with it–I didn’t experience any major or even minor disasters over the past seven months. My car did get randomly towed and–unrelated–a couple of old moving violations came back to haunt me, but on the whole, unanticipated expenses were minimal. My house and all of its appliances behaved themselves, my car never needed a major repair, I stayed employed, and I didn’t get sick or injured which could have resulted in an expensive hospital bill. Life didn’t really throw me any serious curveballs. My mom says that God had a hand in all of it.

Finally, there were definitely some contextual factors at play here. My income was higher than the average household income of $50k and I lived in a city that has a relatively low cost of living. I was also single and childless, so the lifestyle changes I made were generally victimless.

Looking back, I’d say that I was in the perfect situation to pay down my loan at an accelerated rate, and while my achievement might seem remarkable at first blush, I’d say the recipe, while not necessarily easy to follow, is fairly straightforward and likely adaptable to many other people’s situations.

I’m Just Cash-Poor

So let’s take stock of my assets. While I’ve sold some of them off, I still have the ones that are important to me:

As cliché as it sounds, I still have my health. Throughout this challenge, I made it to the gym an average of four and a half times a week. Nothing is worth the sacrifice of health.

is worth the sacrifice of health. Again, as cliché as it sounds, I still have my friends and family. Throughout my money-saving and money-generating ventures, I never did anything to lose the respect of anyone I cared about.

I have one (1) single vehicle and a couple of years paid down on my mortgage.

I have $1,469 in cash and $46k in my 401k.

A Shopping Spree Awaits! Or Not.

After I regain my cash cushion over the next few months, what comes next? I’ll have an extra $1,057 burning a hole in my pocket every month, so it’ll be time to finance a slightly used Porsche 911 or something, right? Let me answer that question in a round-about way.

It was quite coincidental–but I think perfectly appropriate–that the pay-off of my debt matched the seasonality of the calendar year that I experienced while growing up in the north. I started this blog in late August as the summer was coming to an end. It was time for me to put away my toys and stop spending money so frivolously.

In October, with $30k paid off, the smell of fall was in the air and everybody was getting excited for cooler temperatures, the changing colors of the leaves, and football. I was excited to pay off my student debt.

In December, with winter settling in and the cold becoming a harsh reality, it came time to put on some layers and hunker down. I was still paying down my debt at an accelerated rate, but the novelty had worn off a bit.

Now, spring has arrived and there’s a rebirth. The loan is paid off, the air is warm and alive with the sounds of chirping birds, and girls are wearing sundresses. Everything’s going to be okay.

Spring is a transformational time, and so was paying down my debt.

For the 15 months leading up to my NMHD challenge, I was spending an average of $7,754 per month, and that figure excludes my student loan payments. During the past seven months, the average has been $3,129.

During the past seven months, I’ve kept track of the various expenses I’ve deferred for the sake of paying my loan off early (e.g., new running shoes, a car phone charger, printer cartridge, etc.). Last week, looking ahead to when I’ll reinstate some purchasing power, I categorized the deferred expenses into four groups: things I need to buy immediately, things to buy within the next one to three months, things to buy in four months or later, and things I can probably do without for the rest of my life.

I know in two weeks I’ll get a paycheck, and two weeks after that, I’ll get another one. And unless I really start sucking at my job, the economy goes belly-up, or the company falls apart, I’ll probably continue to get a steady stream of paychecks for awhile.

Nevertheless, I put most of those deferred expenses into the last two groups. I’m just not looking forward to buying stuff again. In other words, no, I don’t think it’s time for a 911.

But why not?

Based on the ten-month outlook and assuming I maintain my current course and speed, I’ll have almost $15k in savings by the end of June, which is month ten. What that means is that I never had to sell my second car or the motorcycle or a bunch of stuff on Craigslist in order to hit the month-ten goal.

Along this same vein, one might say that at the end of September, instead of paying down $30k on my loan like I did, I could have invested the money in something as simple as a Dow Jones index, which had nowhere to go but up, and ridden the 21% gravy train from September 26th to March 23rd to net $6k. Doing so would have allowed me to keep some of the stuff I sold.

The thing is, I don’t actually regret selling any of that stuff.

I spent the first two months of the challenge trying to convince myself that my debt should be paid down organically, not by selling off assets, but in the end–and I don’t know exactly what happened inside my head–I decided to sell my second car and motorcycle. And when I made that decision, it felt like a burden was lifted from my shoulders, and I even went on to sell other stuff I didn’t need like my roadbike and other miscellaneous junk.

So do I look forward to getting more stuff or flashier stuff in my life? Am I on eBay Motors shopping for a Porsche? Not at all. Things like the ink cartridge and the new running shoes will replace my empty cartridge and worn out running shoes, so I’ll net out to having the same number of stuff in my life. For that reason, those things went into the second category, the things I’ll purchase in one to three months. The phone charger? I put that in the “never” category. I don’t think I drive enough to need it, so I can’t justify adding that clutter to my life.

I’ve learned to be content with the things I already have.

So What Does Await?

During the past seven months, I’ve gone from one guard rail to the other. While I don’t want to continue to be as frugal as I have been over the past seven months, I don’t want to go back to the way I had been living before that, either. I believe life becomes optimized somewhere between an extremely frugal state and a financially wreckless state; a happy medium exists somewhere between spending and saving money. But where exactly is that medium?

I used to spend my money and wonder, why not? As long as I maintain a six-month Screw You Fund, contribute to my 401k, and pay off my credit card every month, why not spend the money? I’ll keep working in this job–whether I like it or not–because it pays the bills and allows me to maintain a certain standard of living.

Now I’m thinking big-picture. Back-of-the-envelope, 15-second math using the most basic assumptions indicates that I’ll have $1M in savings by the time I’m 49. I can retire and live frugally off the interest and/or get a more meaningful job. That calculation doesn’t include the very material impacts of potential bonuses and cost-of-living and performance raises, investment decisions, and the mortgage pay-off; including those assumptions would only pull in the date that much more. Sure, there will be certain expenses like children and maybe a bigger house at some point that will offset some of those excluded gains, and one could always argue that $1M isn’t enough to retire on–especially with inflation–but I think that high-level, the key takeaway is clear: If I continue to live a somewhat frugal lifestyle, make the right decisions, and stay in Lady Luck’s good graces, I won’t have to work till I’m 65.

So every dollar I spend on non-essentials today is a trade-off that will bear itself out far into the future: the new car, the bigger house, the cruise, the 60″ 1080p LCD TV–those all equate to extra days I’ll have to work. And balancing the pros and cons of decisions like buying the car/house/vacation/toy versus retiring early is extremely difficult because of the timing of the gratification–humans naturally prioritize near-term experiences over long-term ones.

And early retirement might not be what I’m looking for–I’m not yet convinced that it is–maybe it’s starting a business or doing something humanitarian. Either way, trade-offs exist between what I really want to do with my life and the things that I might want to buy.

D.T. Suzuki wraps up his book Introduction to Zen Buddhism with a fairly ominous warning about Buddhist monks who put themselves to the test in the real world after having spent years living and studying at the monastery: “It is no longer imperative for [the monk] to remain in the Zendo; on the contrary, his intellectual attainments must be put on trial by coming into actual contact with the world…Many serpents and adders are waiting at the porch, and if one fails to trample them down effectively, they raise their heads again and the whole edifice of moral culture built up in vision may collapse even in a day.”

When I was living in the admittedly constrained world of NMHD, there was no paradox of choice. 9.9 times out of 10, the answer to the question of whether I could buy something was simply no. I had little anxiety about buying things because I simply couldn’t afford anything.

But now I’m opening up the door to the monastery and I’m venturing out into the real world with my new purchasing power and I have real decisions to make that affect not only my day-to-day life, but my future 20+ years from now. Truthfully, a part of me wants to cower inside the monastery and attack my mortgage next and avoid the serpents and adders, the really weighty financial decisions that threaten to collapse my newfound frugal nature.

But I know that the real world has more to offer than the monastery, and I’m excited to embrace it and to search for that happy medium.

To freedom!