indebt College Graduate

I am 28 years old, working as a Software Developer.

I have $50k in college loans. ~14,000 is at 4.5% interest and is actually a loan my mother took out for me, that i am taking responsibility for, the rest is at 3% interest. ~$400 a month in payments Payments total . I also have $5000 in credit card debt, paying ~$300/month…but it never seems to go away lol

My college debt has really kept me from taking on any other major debt, such as a home or even a car loan. I feel like this large student loan hanging over my head needs to be paid before i can take on more debt! $50k in debt makes me feel like i already bought a really nice car…or a really cheap house.

The loans also limit my mobility and limit my flexibility. I was trying to start my own business, but the loan payments increase my cost of living artificially by $400/month. I also have to keep it in mind when looking to relocate for work.

The credit card debt bothers me less, as that can go away…yes i may have a stain on my credit for time, but the debt is gone. The 50k loan cannot be removed by bankruptcy…cant make deals to pay less (like i have done in the past with credit card companies) or anything…though it can be deferred for a limited time if you meet the deferment requirements.

outwiththejive

I am graduating this week with an undergraduate degree in finance. Of course, to get it I had to take on a good bit of debt. I currently have $20k in student loans, $1,500 in credit card debt, and a $12k car loan. Overall, I think my debt situation isn’t too awful. I’m handling the monthly payments well, and don’t feel too much strain as I prepare my budgets.

One major point: my church has provided many useful tools to help individuals and families deal with financial issues. You can look it all up at http://providentliving.org. In particular, I like the manual called “One for the Money”. It provides some excellent guidance on getting out of debt without bankruptcy or other extreme means. Of course, not all programs work for all people, but it’s a nice place to start.

J.R.

I am only very recently debt free as of 2 months ago.

I graduated from college in December of 2004 and had $10,000 in student loans. (My parents helped pay for some of school, and then i worked part time and paid for most of my living expenses).

When I first graduated, I received a credit card that had 1 year of interest free use. I knew in my head that I should pay off the card in full every month. But with the mental “safety net” providing me false reassurance, there were a few months where it didn’t get paid off in full which kept rolling over each month thereafter. Towards the end of the first year I almost wasn’t able to pay off the balance in full.

It wasn’t because I had racked up a huge amount of credit card debt (it was less than $2000 that month total, I use it for everything in order to keep track of expenses/ease of use), it was just a sudden realization that “oh crud, I need to be able to pay all of that off next month” I had forgotten about the interest free portion until it was almost too late. I was only able to salvage the situation by going -incredibly- frugal that month.

Upon graduation I also bought a used car on a $12,000 loan. I focused on paying this off as quickly as possible. Applying most of my commissions check towards this loan (I’m in sales, 66% base salary, 33% commissions). This took about a year and a half to pay off.

So having learned that lesson about how to manage a credit card, and paying off my car note. I then went about focusing on eliminating my student loan.

My motivation for doing all of this was becuse I met a wonderful girl who agreed to marry me. Her other wonderful qualities aside, she is a wonderful spendthrift, and had 0 debts, and great financial habits. I didn’t want to bring any of my debt burden into our marriage so I vowed to pay off my student loan before we got married. (I also made sure to pay for the ring in cash).

I only accomplished this feat by not raising my standard of living much higher than it was in college.

I’m pretty good about spending, but I was initially a poor planner. And it requires planning and forethought to remain in good financial standing.

My situation is far better off than most and I still almost got mired in debt.

I had 10k of student loans (parents paid for the rest, I am very fortunate there)

I had a 12k car loan

I narrowly avoided credit card perils. I paid off 22k of debt in just over two years. It was hard. Very Hard. I figure that I have made about 95k since graduation, which is more than alot of people.

So if I make more than most, and had less debt than most, and it was this difficult to pay everything off… I can’t imagine the dire straights other people are in. My generation needs help. Spread the word.

mark

I have about 15k in credit card debt. Some of it is from college and the rest is from trying to keep myself “afloat” during a lengthly unemployment.
I pay as much as I can every month but it never seems to go away.
It has been a huge burden on me and has probably cost me a couple of great relationships.
I am considering taking a second job and cutting my expenses to bare minimums until it is gone.
It seems every time I think I am getting things under control something else pops up like a car repair or another unexpected expense.
One thing I have learned is having this “bad” debt is the absolute worst feeling I have ever had I won’t let myself fall into this trap again, once I get out.

Almost 30

I am 29 years old, have a BA & 1 year of grad school which contributed to student loan debt of $38k. I am not terribly worried about it, as I can’t imagine where I’d be without it. My consolidated interest rate is 5%. I have $18k in retirement and try to save at least 10% of my income in retirement. Overall, I like to save.

Yet, I can’t seem to keep a liquid savings account for emergencies or save for a down payment on a house. I would have to use a credit card if something major hit. There always seem to be more variable expenses creeping up. I make $52k/yr. I recognize that part of my problem is that I like to treat myself to the typical consumer bs that I don’t really need which really annoys me. How much food & clothing does a girl really need? I spent $20/wk on food in college and luckily vintage clothing was in style. It amazes me how much more I spend on this crap now.

I don’t have credit card debt, although I did for a time and learned my lesson. I don’t have a car payment and don’t want one and drive my paid for used car very little & ride my bike. I hope to have a house in the future. I like money and hope to get better at taming my demons and reaching my financial goals.

thanks for the blog!

Jonathan

I am 25 years old and have been working to pay off all my debt for the past 3 years. I started with $40k in Student Loans and a $20K SUV. After getting serious about owning a home and being wealthy later in life, my wife and I have nearly paid down both debts. We will be completely debt free by the end of July ‘07. People said we are completely nuts for paying off debt with such low interest rates, but they are all poor so we tend not to put much stock in their opinion. Together, my wife and I, make appx. $70k a year and rent an apartment. By saving the money we would have normally put toward debt, over the next twenty years, we will be millionaires by our early 40’s.

Matt

I am $32,000 CDN in debt and I feel great about it!

$24,500is from student loans and $7500 is from my parents.

I am 25 and graduated in 2005 with a Computer Science degree. I spent 16 months in Europe volunteering after graduating and have returned to Canada where I have just landed a well-paying Software developer job (for a recent graduate).

I recently re-read “The Richest Man in Babylon” and will follow the plan to put 20% of my income towards debt-repayment. At that rate, I figure I can be completely debt-free in 2-3 years.

I have no car or house and am single.

I feel great about having this debt because I know it is good debt that has allowed me to learn and earn more. Also, I feel great because I have a plan that allows me to become completely responsible for my finances.

Although I don’t know my credit rating, I believe it is quite good. I pay off my credit cards every month and the credit card I use the most has just reduced my interest rate to 6.99%.

DWS

I graduated college and had nearly 27,000 dollars in debt. The payments on that debt were killing me. I decided that I was sick of having it and made it my goal to get rid of it. I have worked two jobs (occasionally 3!) shifts of 18-26 hours, most weekends and I budget every cent that comes to me. I live very frugally and I will have the 27,000 paid off in full next month. Total time? 19 months. I make less than 50k, have an apartment and do not borrow or leech off of anyone. Anyone can get out of debt if you are willing to cut your lifestyle to nothing and work your tail off! The pot of gold at the end of that rainbow is sweet indeed.

Michele

I am almost 38. I think we’ve had dumb debt and smart debt. When my husband and I were in college the first time, we got a free t-shirt or something and got credit cards with reasonable limits ($500.00). Sure, I had no income, but that didn’t seem important at the time. Wouldn’t you know it, I was responsible enough to have my limit raised to $2,000 after a very short period of time! Except that I wasn’t, and I paid thousands of dollars in interest and late fees and wrecked my credit rating for several years.

It took many years for us to clear up this debt. I can’t name one purchase that was truly necessary either.

After we worked and saved and got rid of most credit card debt, we went back to school. I went to law school and incurred about $30,000 in loans. My husband finished his undergrad and borrowed about $12,000. We’ve been paying on the student loans for almost seven years and the balance is coming down nicely. We bought a home for far less than the amount that we ‘qualified’ to buy and we try to live reasonably. We are doing this on one income because it is important to us to have a parent home with the kids.

Because the student loan and mortgage rates are low, I am not really trying to pay those off in a hurry, but instead trying to save money for retirement, for emergencies, and for my children’s education. Although a plasma TV would be very nice, we have made some sacrifices. We are not interested in trying to keep up with the Joneses in their McMansions.

The only advice I give to friends/relatives going to college is NOT to open a credit card account just because you can. It takes a very disciplined college kid to handle that.

John

my debt scares me. primarily b/c it is not under control. all of my payments are on time, & i am working on reducing credit card debt, but it seems like i’m plugging holes in a poorly built dam. unexpected costs have depleted the savings i spent 2 years building & despite attempts to build it back up, the depletion continues. my debt-to-income ratio is well above what it should be (~60-70%). i’ve paid off two cards in the last year only to have emergencies fill them back up.

the worst part of my debt is the mental weight that it brings with it. it isolates me. it makes me unhappy. it occupies my time. it forces me to react instead of anticipate. it saps my motivation. it stands as a constant barrier to everything i undertake.

it keeps me from doing what i love & seeking the one to love.

it makes me tired….all the time.

Tracie

I am 24 years old and two Sundays away from graduation with a BA. I have $11K in student loans, 8K in auto loans, and 1500 in credit card debt.

Student loans: I went to community college for 4 years, got 2 associate’s degrees, and finally figured out what bachelor’s to get. I have worked throughout my college career and paid everything myself.

Community college – used the college’s installment plan and paid everything off. State college – loans for all tuition. Paid room/board for my junior year and books for both with cash/credit – a total of about $8500. This kept my credit around $3K for about 18 months, which was stressful on my income. I had to continually scrimp to pay it down – just to make room for more bills.

Auto loan: Commuting finally killed my car that I had since high school, and I was without a car for 6 weeks in the winter (in NJ, not a good thing). My mechanic dad talked me into a Buick. Not a sexy car at first, but it drives nice and looks mature. 19mpg city, though, so I may sell it.

With my student loan refund I was able to get my CC debt down to $500 in late Feb. It’s about $1500 right now due to new tires and taxes owed.

I’m feeling pretty good about my debt. My goals once my job (regulatory consulting) adopts me full-time at $40K are to kill the CC debt, double car payments to reduce the length of the loan from 6 to 3 years, max out a 401K, and move out.

jen

At 22 and a year out of college I had over 15K of credit card debt – my job and second job didn’t pay enough to meet my expenses so it just kept going up. Paying off cards with other cards, opening new cards to transfer balances, leaving statements unopened. Thank God a friend helped me get it together to figure out what I owed and to whom, and to consolidate and get it together. I paid the last card off five years later but it’s done, and I have well above average credit at 31. Learned that lesson the hard way and hopefully will never be there again!

Bethany

I’m a 20-year-old college student. Thanks to a lot of scholarship money I don’t have any student loans. My only debt is about $300 that I allowed my boyfriend to charge on my credit card (which is 0% APR for quite a while)

I normally pay off my credit card at the end of each month, but this past Christmas I didn’t do that. I had 0% APR so it wasn’t a big deal. I hadn’t saved up enough for Christmas and I knew I’d be able to pay it all off after working over winter break.

eric

@#19 – I feel for you. I’m 26 with ~40k in student loans and CC debt, just starting to manage to chip away it. It’s awful, having that weight. I feel like i have no freedom; with that $500 due every month, I can’t afford to be without income for a second.
I live alone, but have no independence; I’d like to have the freedom to move to another town, or another state; to switch careers if I get bored. The college education, as much as it does for my resume, wasn’t worth it – I’d gladly take a 10-20% pay cut to be even. People whose parents can afford to pay for a moderately-priced (ha!) school – I want you to understand how lucky you are.

Rico (you know THE Rico)

Age:24

Education:BFA (Studio Art)

Debt:$0

Credit Cards:4 personal 2 business

Savings:8k roth ira, 5k savings, 2-3k at a time in checking

Income:~$3K/month

Living situation:Renting Apartment

Work situation:Contract IT work (work 9 months, vacation 3, work 9 and so on) Small import business just started this year.

Cars:2 (89 civic, 03 mustang) both paid for.

I’ve been working since I was a little kid. I’ve mowed yards, collected glass/paper/cans to recycle for dough, IT work in high school, IT work through college (had to work full time and attend college full time in order to pay it all myself), IT work post college. Working contracts does enable me to vacation and enjoy life quite a bit. It does limit me from being able to own a home (and subsequently more and much nicer vehicles). On the one hand it’s nice to have accomplished everything myself financially, on the other hand I realize I missed out a lot on life because I’ve always worked so much.

AM

I am 35, my husband is 38. We live in the Phoenix metro area.

I make $72k/year
He makes $55k/year

We owe $3500 total on two credit cards and $2k on our first new furniture ever.

We have two car loans: 1. balance 4k @ 200/mo and 2. balance 7k @260/mo

We own a house with a mortgage of $340k

We own a rental property with a mortgage of 218k.

And we owe 130k in student loans. We worked all throughout our 3 degrees, didn’t use CC’s, never got help from our parents, and lived like paupers – yet with interest over the years, here we are at $130k.

Oh yeah, and we are expecting our first child in July.

This amount of debt absolutely staggers us to think about. But, between our 401k’s, my 457k, my state retirement plan, and cash we put away every month, we save between 25-30% of our income. I will be eligible to retire with a full pension when I am 55, him at 57, although we will still be paying on our student loans well into retirement. Doesn’t it suck that I have to plan my retirement to include student loan payments?

The positives of our scenario is that we are saving and we are frugal, we follow a workable budget, and we are getting great tax benefits from owning a rental property, and our incomes will keep going up with our very stable jobs. Both properties we own are in ahigh-demand area college town, and even with the slump, have appreciated nicely. We have about $80k (conservatively) in equity between both.

The bad news is that our cash flow right now is tight. We are expecting a baby soon and are hardly prepared for this monumental expense. We don’t live much differently now than we did in college. We have never taken a “real” vacation. We got married for under a thousand bucks in Vegas 10 years ago. We’ve never had cable. I cook dinner every night and pack my lunch every day.

But you know what? I don’t regret any of it. I’m sure we’ve made some stupid decisions, just as I know we’ve made good ones. Our situation is going to be different this year because of having a baby. So, we’ll just stick with our long term goals, plug away as we can, and not beat ourselves up for carrying some CC debt this year.

Happy budgeting!

Joe

I have no debt. I am a grinch. I sometimes regret not going out with friends to dinners and movies because of the costs. I am scared of paying money. This fear has kept me debt-free, but it has also yoked my life.

I wish everyone with debt good luck in paying it off (especially the credit card debt – the interest rates are so high!).

Emily

I am finishing my undergrad degree this may from a top private university. I have 23K in student loans, my parents paid the rest. Luckily my parents also helped with my living expenses. However, I have almost 4K in credit card debt. I’m unsure whether my parents will be paying it off, or if I will be. I’m learning to take control of my money after being taken care of for so many years. The debt doesn’t really bother me yet, but I’m sure that’s because I have not yet entered the “real world” and haven’t had to start paying these things off yet. I am attending a graduate program next year, completely on my own loans. These loans will come to about 35K. I have a feeling the debt will start to stress me out pretty soon.

brint

I’m 25. Two years ago I was debt free. Scholarships paid for college. Parents paid living expenses. My car was a graduation present from high school.

At 23, one year after graduating in business, I was given a diagnosis of possible Multiple Sclerosis. In the last two years I’ve built up more than $20,000 in credit card and medical debt.

But most of it was travel related. Might as well travel while I feel good. Why the hell not, right?

Kathryn

After a BS and an MA, I found myself in a remarkable amount of student loan debt: $98,000. I had never been educated in financial matters, and I regret that–I had no idea I had accumulated that much debt over my college years; when I went to consolidate my loans (got a pretty good rate, 4.75%) and the woman I was talking to gave me the amount, I could feel my heart drop to my feet. I could have almost bought a house for that amount of money!

Thankfully, I got a good job and I’m starting to make payments, but I strive every day to put just a bit more aside, so by the time it’s paid off, I

a. Won’t be 57 and
b. Will not have paid $70,000 in interest alone

My warning now to every college student I can reach is don’t take the student loans if you don’t have to–take a lesser amount, get a job, and pay your interest as you go if you can–though I have my debt ‘under-control’ and make monthly payments, I’d certainly rather be saving towards a house right now than speculating what on earth the previous tenants did to the carpet.

Matt

Well, I’m 29 now and currently have a total of around $50K in debt.

$16K right now is in student loans (I was able to consolidate last year, so the rates are low and will remain such)

~$12K is on a car loan to get me a car some years back furnished by the ‘rents.

The rest is in credit card debt (~$22K)…the crazy part is I never got a card until age 24. I got stupid on a couple of bad investments/scams, and also have some money tied up in trading on the futures market…which is going OK so far as I’m actually learning about it and not just trading wildly like some may and blow everything up.

Couple of nice car repairs over the years also didn’t help matters that much either…overall the interest rates on these cards are low (

Stacy

I’m 22, and I’m going to graduate in August most likely.

Current debt: $15,000

Five thousand is in government loans and the rest is a loan at the same rate from my bank. I also got some grant money.

I was very lucky because my great-grand parents had invested in savings bonds when I was a baby and that helped me pay for most of college. However, they couldn’t see how much costs would eventually rise.

I also participated in a study abroad program in the UK. In case you don’t know, the exchange rate right now is 2 pounds to the dollar. So I ended up spending more of my 10,000 than I had originally planned.

I’m worried about it because I’m coming back in June, and I don’t have a job, my parents are moving to Indiana (I’m from TX), and so I need an apartment almost immediately. Because my dad has decided to join seminary, my parents won’t be availiable to help me out. I’m going to have to rely on my boyfriend when I get back for finances, and I hate that. I like relying on myself. Also, the job market hasn’t been so good, and I don’t want to have to work retail again. Mostly because of the poor pay vs amount of work.

I don’t have any credit card debt because my parents have had problems with that. Occasionally I use it, but only in amounts I know I can pay off by the end of the month.

I know I’m not going to have any insurance, and this frightens me, because I won’t be able to afford health care without it. I have no savings at all. Last year, I got in a car accident, and it completely wiped me out, even with my parents helping.

If I could change something, I wouldn’t have gotten into the apartment complex I did. It was way to expensive for me. If I had gone cheaper I could have saved some money. And had a social life because I wouldn’t had to have been working so much just to eat and pay rent. I think I may have lost some friends because of this and because of my stress level at the time.

My Ozzie friend gets a freaken check from her government every two weeks for going to school. 0_0 She was all like “wow, you guys work and go to school? Being a student is your job.” Ha, I wish my government thought that.

I consider myself very lucky – I didn’t have to pay for all of college by myself, and my parents were able to provide insurance, cel phone, and car insurance – without which I wouldn’t have been able to have a job. My grandmother bought me a new used car when my old Honda ‘86 (no AC, in TX. Imagine.) died at the ripe old age of 20 (it could legally smoke, and it did). Now I have a Honda ‘96, which was $4000. Drives great. Has an AC. I’m not picky. If I can I want to try and pay my grandmother back somehow. I feel bad owing people money – and borrowing money.

Hopefully by living cheaply I can get rid of debt and live normally.

Tyler

Well I am 20 and have about 105k in debt. The majority of my debt is in my mortgage, (about 98k.) I purchased a house near campus for when I am going to school. After a few years out of school I plan on moving out of it and then renting it out entirely.

The rest of my debt was in the form of loans from my parents to help pay for college. This is 5-7k, since I don’t have an online account tracking this I would have to pull up my documentation.. Since your not the IRS that wont happen

Then on top of that I owe about 1k for stuff relating to my business. That will probably just get paid off at the end of the month though.

Now this debt is kind of scary and at the same time kind of good. Since most of my debt is on a property that I believe will be a good long term asset for me it makes me feel good about it. However, I am not going to lie, the payments are pretty much over my head and I rely on the rents that it generates to make the payments. Of course I have a couple month buffer, but that scares me.

The monthly payments on my loan and everything on escrow is around $720..

allan

I’m 19 years old and I am $148,000 in debt. I go to a private school that costs me $47,000 per year. My parents were kind enough to pay the first year of tuition for me, but I am on my own after that.

The only reason I am staying in this university is that I have an unbelievable job doing research at a nearby ivy-league material school. My only option to remove this debt is to transfer to a state school, which I can’t bring myself to do.

My solution for solving this debt: 80-hour work weeks for startup companies in exchange for equity only. I’ll give myself three months at a new startup to see if it will make it; if not I’ll move on. I will likely start my own company in a few years, once I learn from the mistakes of the others.

If anyone that is reading this is interested in a smart, enthusiastic undergrad to join their startup, please don’t hesitate to contact me. I’d be more than willing to drop out if the opportunity strikes.

NIUIcePrincess

hi Ramit,

I’m 25, getting married next year, and my fiance and I just bought our own condo last month. I have about $35k in student loan debt, but I think it is entirely worth it since I wouldn’t have gotten my job without it. It would have been higher but I was fortunate to have a tuition scholarship for 4 years, so the debt was for books and room and board and misc fees.

I’ve gotten my credit card debt down to approx $650 after I started my own PF blog. When I first got out of college I had about $1400 total CC debt, and a federal Perkins loan debt of $890.00. I got it down to $80 after some aggressive payment planning.

I have a small emergency fund established that I’m trying to grow, and my fiance and I are also paying for most of our wedding ourselves. He took care of the condo downpayment and I’m taking care of the wedding. A twist to this is that last year I was diagnosed with arthritis and after countless blood tests, rheumatologist visits and even a visit to a orthopedic surgeon for another test (they thought it was carpal tunnel), I spent approximately $2300 + prescription medicine cost (generic, so it’s cheap) in after tax money since i didn’t open a health care spending account at work, even though it was available. the $2300 is already after the insurance’s payments and deductibles too. This is why I am fortunate to have the job that I have that has benefits, and also that I had the cash on hand to pay the medical bills. The cash came actually from our wedding fund which is currently at $10k (we are aiming for a $15k Illinois suburban wedding and pay for it in cash), but my fiance said my health is more important and that it was better we pay it off all in full now…rather than let it all add up and put us in even more debt. We are sure anyway that we can easily put the $2300 back via more savings in time for our wedding.

After all the arthritis drama I had to go through, I understand now that money is nothing when you are not in top health I am ok now, my pain is under control w/ medication and monitoring and I can last thru the work day ok. But I want other young people to understand that without health, they have nothing…because they won’t be able to work, and pay the bills, and save, and plan the rest of your life. Take care of your health and you will be worth millions.

Justin

I’m 21, I’ve got roughly $15,000 in education loans (which I don’t yet have to pay back) and I’ll probably be adding on to that to get money for studying abroad for the next academic year.

I’ve got $3045.82 debt between two credit cards, which I accumulated from paying for a vacation for myself and my exgf last summer, buying plane tickets to go home and visit the current gf and/or my family, and I needed a cash advance to pay off my student account because it came due earlier than I was told it would and I didn’t have the money.
This credit card debt stresses me a lot out a little, and it definitely makes me feel more cautious about spending with my credit. I’ve got a plan which should pay off all my cards by the end of the summer. As for my school debts, I try not to think of those right now because I just want to graduate and I’ll take whatever money or loans I can to do it. I do plan on consolidating my loans once I graduate, but to do so before means I lose my 6 month grace period and as nice as a lower interest rate may be I’d much rather have the 6 month grace period to get started before having to pay.

The last credit bill I got had my minimum payment doubled, which I just heard is some new law that was put in place, and I really don’t understand it. This is stressful for me as a student because I’ve been making the minimum payments ech month, but barely so. I get paid once every 2 or 3 months from a research study I take part in, about $300 usually. This is money I spend on bills and food, and it tends to go fast. I’ve lately been considering calling a debt relief company, but I’m not sure if that would be right for my situation but I’ll be doing some research into this topic as well.

Nony-mouse

I have quite a story to tell as well. I came to this country at the age of 20 to pursue my bachelor’s degree. I did 2 years communit college back home, so only had 2 years left. Fortunately, I come from a society where it is the responsibility of the parents to pay for the childs education. [I value this tremendously now]

I had no clue about finances and started applying for credit cards so that I can get the free T-Shirts on campus. Ended up getting over 10 credit cards and racked up around $6000 in debts spread over the cards. I could not afford to pay this as a student so i said fuck it! I was hounded for like 6 years by credit card companies and third party credit agencies to pay up…but I never did. Fast forward 11 years.

My credit score is now at 719, I have about $350K in savings with no debts (apart from the severely late debts accumulated long time back. I have the capability to pay now, but credit companies that I defaulted dont even know what im talking about when i talk to them and besides a financial guru once said that its no use paying them back if u have gone into serious collections unless it makes u feel good to do so.)

Im 31. So those people out there who fucked up….dont worry, there is still time to salvage the situation. [ONLY if you realise the problem and never repeat it]

Mike

Worst year for me financially was 2003. Got married and my wife had a preemie baby all in the same year. My son spent his first few days in the hospital ICU until he was strong enough to come home. By year’s end, we had racked up about $15,000 in credit card debt.

Decided all along that my wife would be a stay-at-home mom, and my gov’t salary was barely getting us by paycheck to paycheck. Fortunately, I invested in the gov’t TSP plan from day-1, so it continued to pull pre-tax money since I started working for them in 2000.

In 2005, I accepted a transfer to Japan, which came with a lot of benefits… many financial ones (rent and utilities paid, tax free allowances for cost of living, etc). I also got a 3-month salary advance that helped us get over here from the USA. Part of that I used to pay down debt, the rest we used to get settled in Japan.

By early 2006, we were completely out of debt. I maxed out my TSP and put additional money into a money market acct each paycheck so we can save for our future first home down payment.

Now, we’ve got about $100K in my TSP retirement account, another $10K in my son’s 529 college savings account, and nearly $15K saved up for our future home down-payment.

Best thing is that in the next 3 years, we plan to see much of Japan, and also visit China, Thailand, Singapore, Australia and New Zealand.

Jo-less

I feel very lucky, reading all these stories of six-figure school loans and so on. I have no debt. I had a GBP5K student loan which I paid off within a year or so of finishing my MSc (I worked full-time whilst completing that). I paid cash for my car, and I was lucky enough to find a wonderful high earning SO who also has an additional private income so we have no mortgage or rent payments. I make GBP30K a year, she makes GBP43K, and has an income of another GBP30K or so. I’m saving as hard as I can for retirement and an emergency fund because I don’t want to waste the opportunity we have to save now since we might have a family or other problems in the future (sick parents etc). Good luck to all those trying to get themselves debt-free. It certainly inspires me to plan for the future.

corey

I can’t help but to read all the posts about people with $1,000 to $3,000 that finally get there balance to $0 only to have an emergencies come up and they need to charge it. After struggling for 3 yrs with the same situation I found a solution that I recommend to all. First you have to stop the bleeding! Next month when your credit card statement arrives with a total balance ignore it! PAY THE MINIMUM and put the difference between that and the amount you really would like to pay in a ing direct savings account or equivalent. WE are all young do this for 6 to 9 months you should be able to save more than you did in cash in a long time. Do this without charging more in the mean time and it will lead to no need for credit cards again. I know this is very unconventional and outside the box thinking. I may even get ripped dearly for this but I’m sure it will prove beneficial to at least one of you.

Zachary

I racked up a quite large credit card balance when I was an undergrad. Here are a few things I wish I had learned a little earlier:

1) Credit cards are not for Amazon.com

2) Credit cards are not for fast food

3) Credit cards are not for internet porn (or so I hear…)

4) Credit cards are not for gasoline

I am still paying off my original balance for all this garbage.

Joshua Keezer

A little late in the game but my story has been outlined and is being outlined on an LJ community I made. I figure I’m as open as I can be about my debt without risk of ID theft.

http://community.livejournal.com/goingdebtfree/?skip=20

As of this point in time, I’ve been airing my financial situation for 16 weeks. All of the steps up and down are there including the latest crash.

Ivan Anic

I graduated with BFA in animation and film last year.
At the moment I have 132 K in loans for my education. The APR on it is 9.25 %, making the monthly payment at least $1 100 . I had to put in on forbearance last month because I could not afford paying it and all of my bills.

At the moment I work as a VFX Supervisor making $42 K a year. I live in LA which makes the living expenses pretty high.

I own a paid off car. I’ve paid off a $2000 balance on one of my credit cards last month, leaving me with $500 worth of debt.

Just today I opened a Roth IRA with a plan to put $50 every month.

I try to conserve on everything and be smart about my finances, but with such ridiculous interest rates on my student loan I can barely survive.

I know how the system works and that student loans are not just free money, and I do want to pay them off promptly, but I don’t know how I am expected to pay a house-mortgage sized loan with an entry level income.

John Hall

I went to a state school for undergrad and had no debt after finishing that. I’m 22 years old pursuing a MA in Economics and have about 50k in debt and might take on about 10k more for my last semester if I don’t get any scholarships. I know that I’ll have a lot to pay off, but I follow economics enough to have heard of something called the Permanent Income Hypothesis. I think I’m going to make a lot of money from my investment in education and therefore it will be worth it to take this much debt. I feel no sympathy for anyone paying 100k for an MBA or JD. They should all be making at least 100k after three years on the job and should easily be able to comfortably meet any payments.

However, I have sympathy for the people getting MAs in Art or other subjects that are less marketable. But then again, how much did you learn that you couldn’t have read in a library?

Joanna

My husband and I are both 23 and haven’t been out of college (or married) for a full year yet. We have ~$13K in school debt. We refuse to ever have a car payment, or carry a credit card balance, so right now we’re working to pay off the school loans as well as save about a third of our income toward a first house, which we hope to move into in the next 6-12 months. Only I have a 401K opportunity at work, and we’re funding that to the employer’s match.

We figured, if we start right, it’ll be easier to continue in the right financial path. Pretty early on we went on a ‘cash system’ for day-to-day budget things, and that has probably helped a lot. Another thing that has helped is my discovery of a love of cooking

Mike

I’m 30 years old. My wife and I exited college with 42k in student loans between us. We added a few thousand more from graduate school later on.

Last year, we were in a car accident. We had an emergency fund but didn’t use it to pay the insurance deductible for the accident repairs. I put it on my credit card instead. I figured I’d make interest on the float, and then pay it off. Other expenses came up, the emergency fund went untouched, and I didn’t pay the CC balance in full. I got the next bill, saw the interest charge and thought, “This is crazy! What are you doing!”

I decided that was the last time I would pay a fee I could have easily avoided but didn’t due to a dumb decision. I also decided that holding low interest debt and working the spread on investments wasn’t working for me; the numbers came out, but it caused too much stress. And that stress provoked some silly mistakes.

My wife and I agreed to take a KISS approach.

So we made our informal budget more clear cut, stuck to it, grew our income, and paid off our remaining debt (32k) over the next 8 months. Now we’re able to save and invest about 40% of our gross income, with other money set aside for personal spending and interesting projects.

The truth is, we pay more attention to the flow of our money now than we did before, but spend less time and energy on it.

JB

40YO single male
~$25k left on consolidated school loan for BFA in graphic design. Currently working as a web developer for a Fortune 500 and running a little web design side business
~$100k left on mortgage, but probably getting another $20k this year in an equity loan to remodel
$2k Home Depot card at 0% interest for hardwood flooring (I’ll probably move that to the equity loan before the 0% expires)
$6900 left on last credit card – mostly motorcycle-related expenses
4 cars are paid for. 1 truck paid for.
Bike is paid for except for the “accessories bill” mentioned above.
No other debt.

My side business doesn’t make me much money right now so I’m pouring my salary into bills and relying on the business income for “extras.”

hl

I am 23 years old and will finish my MA in Sociology next month. I owe 17k at 3.25% and 8,600 at 6.89%, all from undergraduate loans.

Since I graduated from a liberal arts school without knowing what I wanted to do in life, I decided to continue going to school in a field that interested me but not to pay for it. Fortunately I have been able to do this by taking a full-time union job at my university’s library for about 27k/year. Since I live in NYC, that amount is not as comfortable as it might be elsewhere.

Though I have had to pay taxes on my graduate tuition as if it were income I have managed to do so (partially due to deferring my loan repayment) and still save a bit of money for a trip to Europe to visit relatives this summer without resorting to credit cards. I have also received a small promotion recently that should help to cover the impending loan payments for the time being.

My debt is not nearly as overwhelming as that of some of the commenters above, but it remains a source of strain and fear. I am still not sure what career path I should choose, and know that my student loans will likely be a presence in my life for a long, long time no matter which of the available choices I make. I am trying to educate myself to make good financial decisions, and at the same time remember that my eventual goal is happiness.

Brett

I’m 27. My only debt is my mortgage, which is currently about $120,000 USD @ 6.25%. Otherwise, I pay off my (2) credit cards monthly, my car is paid for, and I was fortunate enough to have state school tuition paid for by my parents.

As for how it makes me feel…I don’t like owing $120,000 USD, but I keep telling myself it is better than paying rent. I’m sure I’ll feel better once I get a little deeper into my mortgage and see the interest payments level out.

Chris

I am a 27 years old single male graduate from college. I went to a private college and accrued $45k in student loans. I have $800 at 5% interest, $3000 at ~10% and the rest at 3%. I owe $600 in store cc, and $1800 on a line of credit for taxes.

Since I am self-employed I am shooting towards paying off all but my 3% student loan by the end of the year and the rest of the student loans paid off before I’m 30.

Although I hae my student loan debt, I am grateful to go to the private college I did. I am putting off buying a house until my student loans are paid off.

I wish there was a better system to fund college that would help college students with a leg up on life. Unfortunately I don’t think that will happen any time soon.

jessica

Marriend 5 months
Me: 27
Husband:24

Debts:
-Credit Card $6,700
- My student loans: $68,000
-His student loans: $4,200
-His Parents: $3,200

Income: 72K/yr

When I got married five months ago, I had a finacial breakdown when I looked at the debt we we’re going to be carrying. It’s also when I felt like I could start doing something about it because of the double in income.

I made a lot of stupid mistakes. I was raised poor and I was told to expect credit card debt and other debt the rest of your life. I didn’t have the awareness to look into things myself. My first mistake was to go to a private collage, my second was to go to grad school without a real consideration to how much it would cost me. And my third, I used grad school loan money to pay off the credit card without changing my spending habits and ended up with more CC debt than before.

The good news is that my husband and I have finanally got on the right track. When we got married we stayed in the same little apartment and actually went down to one car. We’ve read and learned alot about personal finance.

The results are astounding to us. In the past 5 months we’ve paid off 6K in credit card debt. My husband has decided to return to school and we have been paying for it in cash. We’ve been able to pay for our formal wedding in cash. We are currenlty on schedule to have paid off the credit card in octobter of this year, and the parents and his student loan by February 07. Plus we’ve upped contributions to retirment and personal savings.

My debt freaked me out 5 months ago. But since I’ve focused my energies on being finacial free the payoffs have been enormous. we currenlty pay 52% of our takehome towards this debt & my husbands school and our modest wedding savings. However, the end is only 8 months away and I’ve learned that if need be we can live well on 50% of our income which takes a way a lot stress and fear of lossing a job or taking a gamble on a life dream of business.

I am uncomfortable with my student loan debt. Had this debt not been here I could be moving more towards recogoning my dreams, but I’ve learned alot in the process.

Our goal for financial freedom is to be able to move out of the country to a developing one and spend our lives doing good works. After the debt is paid (sans my student loans) we’ll be able to sock about about 45% of our takehome pay for our dreams, and that’s what is exciting!

Anne

I am 27, engaged, a grad student with no debt. I got my first credit card at age 22 because I had no credit history and I wanted to buy a car. (I ended up paying cash for it, although I am still using the credit cards to build up a credit history.)

My fiance is the same age and racked up several thousand dollars of credit card debt by the time *he* was 22. Since he quit the credit cards cold turkey, years before I met him, I helped him pay it off. He still has about $60,000 of student loans from his bachelor’s and MFA programs (both private schools), and is working at a coffeeshop. With my encouragement he now has over $2000 in a savings account, but is still only making payments on the interest of his student loans. We haven’t come to an agreement on how those are going to get paid off, but I suspect that he will come around to the idea of getting a better-paying job when he realizes that the house and kids he is so eager for aren’t going to happen without it.

Pabss

I’m a first year student in grad school, getting my MBA and have an undergrad degree in biotech…I currently have around $50,000 in student debt and I have forecasted a total net present value of my debt to be around $75,000 when I finish…I also was foolish enough to take out an $10,000 loan to get a motorcycle because apparently my ‘debt’ counts as ‘good credit’ and since i’ve been dying to get a bike, they allowed me too…so now I pay off my motorcycle interest payments with student loans…interesting huh? but I took that financial debt leverage risk because I am confident in my future and career goals and know that I’ll easily be able to pay this off within 3-4 years after I graduate, mainly because of my excellent networking skills and connections in the industry…not to mention my investment skills and ability to analyze market opportunities.

Vince

I am 28 and have zero debt. My wife is the same age and is also debtless.

We don’t own a home yet.

We don’t owe anything on our credit cards (we pay them off every month.)

We don’t have any car payments, both of our cars are paid for.

We don’t have any student loans.

While I was fortunate to have my parents help pay my tuition (I supported all my other expenses including housing/food) she had to take out loans for her last 2 years of school. These loans were paid off within 3 years of graduating.

Neither of us are MBAs (though my wife is getting hers…free courtesy of her work), PhDs, or anything fancy; we do however work at 2 companies in Fortunes Top 100 Companies To Work For list though neither of us make 6 figure incomes or anything.

We both fund our 401ks aggressively (we’ll each max them out this year) and save a considerable amount of money each month and invest it in some stocks, mutual funds, and tax free interest municipal bonds.

We live in a small but nice 1 bedroom apartment in an expensive area (Burlingame, CA – SF Bay Area.)

So how does this make us feel to be debt free and really on top of our finances? It feels great honestly! You don’t feel overwhelmed by money at all and it allows us to live well within our means. Spend less than you make is the best rule we have and we honestly never have to go without anything. We make sure that if we buy something (last year we bought a plasma TV) that we can either pay cash for it, or put it on a credit card and pay it off at the end of the month. Don’t buy things you don’t need on credit, ever.

Being successful financially isn’t rocket science, there is no trick to it….just pay off all your debt and spend less than you make.

Dan

I am 24 with $25k debt. $15k left on my car loan (5.39%), $10k left on my student loans (5%). I have two bachelor’s and a master’s from a top engineering school.

I would like my debt paid off, but it does not bother me much. Instead of paying it down faster, I am maxing my retirement accounts and saving the rest in a 5% savings account. I have enough in the savings account now to pay off the car completely, but I read that it’s better for your credit score if you don’t pay your loans off entirely less than a year after getting them. I am aggressively trying to build my credit so I can buy a house (and take on more debt… hmm).

Eva

I am 26, I graduated from law school nine months ago.

My grandmother, God rest her soul, left me a $100K life insurance policy when she died my second year of law school. I used that to pay down all my undergrad debt and about 5K in 0% credit card debt. Without that money, I don’t know what I would have done.

I graduated from law school with $95K in student loan debt, and I took out $25K to buy a car (neccessity). I make over 100K and have paid down the higher-interest student loan debt to $50K, but I have barely touched the principal on the car loan. I also seem to have accrued 8K in 0% credit card debt moving and starting a new job and such.

I think about this debt all the time. I check the websites once or twice a day. I feel guilty buying clothes for work. I feel guilty eating out at lunch. And I make a ton of money! I don’t see how I can possibly ever buy a home with my huge tax bracket and no cash for a down payment.

Nicole Rene

I graduated college with NO debt – worked my way through school (it was even a Private Institution!) However, when I graduated I was socked with $15k in credit card debt due to massive dental work I had to have. You cant plan for that! As I am drudging myself out (only a little bit left) I am realizing the importance of an emergency fund – regardless of where you are in your life. Stuff happens!

neha

Wow. These comments are really interesting, and it blows me away to see what kind of debt people have to deal with. But to be honest, I’m perplexed. I see people pursuing graduate degrees that might not help their future earning potential, or continuing to live a consumer-driven lifestyle, while still carrying massive credit card debt (the worst kind!)

I graduated college debt free due to the kindness of my parents. I went to a liberal arts institution, but when it came time to decide what to major in I added what I perceived to be a “useful” field in addition my my passion, thus double majoring. After graduating I got a job at a great company with a good salary, but I have tried not to change my lifestyle too much. i still drive the same old car I drove in college. I max out my 401k. I save a lot of what I earn.

I know that I was lucky, in that my parents paid for college. But I’m in a position right now where if they hadn’t, i could easily pay them back. And I got to this position by working really hard in school. It bewilders me to see people making choices that increase their debt so heavily. There are really good, cheap state schools. Buying a house or a new car is probably not the best idea when you’re carrying credit card debt. There are cheaper cities, and there are more expensive cities.

I understand that a lot of people did everything right and still ended up with debt, and it’s a heavy weight to have around your neck. But there are also different kinds of debt — it’s reasonable to carry student loans for a while, especially if your interest rate is

fanofsteel

Wow, I’ve always known there were people with similar problems as mine. I’m glad I’ve found this site, however I wish it had been available 15 years ago.

As a teen, I always had good credit. I lived in a small town and my family was well known, so I had my own charge accounts at the gas station, grocery store, hardware store, and so on. I worked hard and I always paid the account when I got the bill.

My first experience with debt came about the fall after I got married. My wife decided we needed living room furniture and went and purchased a living room set on credit. Since I had done business with the furniture store, the owner knew me and new I would pay for it.

It was 3 months interest free, but we didn’t get it paid off and the interest accrued and then it snowballed from there. At some point we got in a bit of a spending competition and, due to the easily available credit, eventually ended up with $87,000 in consumer debt (not counting our mortgage). This created other problems, like me working all the time, and eventually we divorced.

I assumed responsibility for all of the consumer debt since I had a higer income, but I was unable to meet the payments. I left her the house. I had a neg. net worth of around $75,000.00
I took anther job and ended up working 14-18 hours a day to keep up. I eventually got to a break even point and seven years after my divorce I had a positive net worth.

I’ve dedicated the past two years to making a concerted effort to GETTING OUT OF DEBT. I’m tired of being enslaved to the creditors. I’ve fallen behind in my taxes and finally filed a current return when it was due this year.

I currently live in a 32 foot camper trailer (I’ve upgraded from the tent trailer I lived in for six months). The Idaho winters are cold but the knowlege that I’m going to be 100% out of debt by the end of this year warms me at night.

My target out of debt day is Nov. 1st 2007. Almost 10 years after my divorce and well over 15 years since we borrowed money for that living room set. I hope this site will continue to caution young people about the dangers of debt, even as small as a $300 loan for a couch!

I don’t know who said it, but it was a quote that was said to me when I was younger. “Interested is a matter of understanding, those who understand it earn it, those who don’t pay it!”

Thanks for all the good information and keep up the good work.

Marie

I found myself pregnant my last year of graduate school. My husband, 3 years my senior, has a 3 year late start in school. So I finished in 2005 and he will finish his masters in 2008. I have 32k in loans for my degree. We will have 23k for his. Our second baby is coming tomorrow.

3 months ago I felt like we were in financial armageddon because I calculated how long it will take to pay off the 55k in loans. My loans have a 1.625% interest rate but its the principal that is killing us. We live below the poverty line and don’t have much money for food. But at this point I refuse to take out any more loans. Because my husband is studying engineeringing everyone I have confided in tells me I am “overreacting” and we will be just fine. But I don’t feel that way – especially with two other mouths to feed. We have been able to break even the last three months by raiding what food we had on hand, and not replacing household items. Next month we add child #2 diaper bill. In some ways though I am feeling more optimistic. Its the first budget I have tried in the last 6 years that has lasted more than a week. My current dream – to get a minivan so that I can stop bending over to get kids in and out of the car – I have back problems.

Jaime

I am 25 and am trying to be debt free. My husband and I have 21k in student loans, and 190k left on our mortgage. I just quit my job to be a stay at home mom. So far we paid off 48k in debt, including two cars, a small student loan, credit card, and a HELOC. We paid all of that 48k off in about 18 months.

Now that I no longer have a job (which dropped our income by more than half) it will be a lot harder to pay off the last of our debt. But I can’t imagine keeping it for 20 years. I am trying to talk to all of my friends and they just think I am nuts and they continue to buy things on credit cards that they cannot afford. If they only knew how much money they were throwing away on interest!

LM

I’m 31; husband is 45 and brought a LOT of consumer debt (about $50K) into our relationship. We have paid down $35K of that over the past five years. Our consumer debt is still around $28K.

I have about $30K in student loan debt (I have a B.A., two Master’s, and a Ph.D.). We racked up some of our consumer debt during the lean years of grad school–mostly spent on moving, car repairs, dental work, and vet bills.

Our debt worries me a lot. We have taken steps to pay it down, but each month we barely break even–even though our combined income is comfortable by most standards. But we live in an expensive state, rent, and send our son to daycare part of the week because we both work. It’s tough.

I see us being in a much better place in 5-7 years, as we are now paying down debt regularly and not racking up new debt. Still, it’s frustrating.

Addy

Wow! I am shocked by all the debt stories. I guess mine is much more positive. I’m 24, female, single, and living by myself (no roomates) in a high cost area (SF Bay Area).

I have about $15k in retirement savings, and about $25k in regular savings. I do have some debt $2.5k in 2.5% student loan, $13k in a 1.9% car loan, and about $9k in 0% credit cards. I have enough money to pay off all of my debt, but choose not to since I’m making 5%+ on the money while it sits in savings accounts. I make about $75k/year.

I was lucky enough to live in a state with an excellent public university system and have my parents pay for the majority of my education. Still, I think I actually live very, very well and could definitely save a whole lot more than I do. I take an international trip every year, have a very large 1 bedroom apartment all to myself, drive a new car, go out to eat often, have completely furnished my apartment with all new furniture over the last 2 years, visit a spa regularly (mostly for manicures and haircuts, but the occasional massage for a treat as well).

My only real concern is that I’d really like to own a home someday, but in this area, anything I would consider buying is between $400k-800k (this is 1-2 bedroom condos I’m talking about, nothing fancy). I am confident that I will be able to save for a down payment, but with housing prices this high, even my (very high for a single 20-something) income won’t qualify me for the mortgage I would need!

PH

I am 34, single, and $6,900 in debt (grad school loans, paid down from $18,000 over four years, while working full time trying to finish a PhD).

On the plus side, I have $65,000 in a 401k, $29,000 in mutual funds, $20,000 in savings and $3,000 or so on average in checking. Car with only 30,000 miles paid in full.

The 401k gets fed 15% of my pay each month, with another 5% match. The mutual funds get only $200/month; savings, $500; and about $400-$500 towards the student loan each month.

I am saving to buy a home, use coupons, track all my spending, pay cc’s in full each month, and have a credit rating of 785 last I checked.

Guns

Bunch of fuckin crybabies. You should have thought twice and spent once. I have debt, I own a house in Vegas so it’s a couple hundred grand. Something else I have is….a ton of money, cash money. I’m a money making machine. The best advice for any young person is get rid of all credit cards. If you don’t have cash you can’t have it even if you need it. Don’t get married and don’t have kids until you are debt free. Learn how to make money. Stocks, mutuals, whatever, just make money. People who say money isn’t everything are fucking idiots. Money makes the world go ’round. Hold on peeps, I’m driving.

Links - 28/04/07 « Krugergold Finance

[...] Debt Stories(iwillteachyoutoberich) I have $50k in college loans. ~14,000 is at 4.5% interest and is actually a loan my mother took out for me, that i am taking responsibility for, the rest is at 3% interest. ~$400 a month in payments Payments total . I also have $5000 in credit card debt, paying ~$300/month…but it never seems to go away lol [...]

Tanner

I have a fancy wedding coming up in Vegas and I refuse to get myself into a massive amount of debt for the rest of my life, so we are doing a bunch of fundraising ideas to reach a savings goal of $5000 for our wedding. Too much debt is scary.
Saving for a Wedding

Terry

I earn minimum wage and have almost $10K in student loans, plus about the same in credit card debt which came from pulling cash to make student loan payments (in an ultimately futile attempt to avoid default on the student loans) and a business startup which ultimately failed due to an extended illness and ospitalization.

I have never made much more than minimum wage, and I have no idea how (or even IF) I will ever get out of debt.

Mike B

28 years old. $161k in student loans. About $100k is federal consolidated at around 5%. Made the mistake of thinking that a second-tier law school in the Bay Area would be worth it. I’m second guessing that decision. I and most of my colleagues don’t have job commitments after the bar exam this summer. Not looking forward to loan repayment while doing temp work. And big firm or Ivy-educated young lawyers think they have it rough? Please.

Larry

Debt from college started with $15,600 and now with interest it is $20k due to insufficient funds, WOW. I have an IT degree and it took time to get due to economic downsizing in 2002. I have credit card debt right under $5k and a SUV payment at $460 a month. No more worries from this day forth. I pay myself first by increasing my assets and decreasing my liabilities. That’s life in simple terms. Now, the funny part I never made a loan payment due to no job at the time with my credit score between 660-700 in 2007 but was wondering how can I pay this loan off in full . If you have the proper solution please respond. In conclusion, to everyone enjoy what lies within pay your self first(by investing) and do what you can on other expenses (liabilities). The plan for life should be Financial Literacy, not job, career, or social secuirty, but happiness to you and yours.

Jasper Ghost

We’re better off than most families. We were lucky in our real estate deals; selling one home on the west coast at the top of that market; but then we bought our new home at the market peak in our current town. Due to the cost of living differences, we still came out ahead in that deal.

We currently have no credit card debt (we converted it into a 8.5% interest equity loan) and no car payments. We have a 30yr 6.25% mortgage that is approximately 50% of the value of the house. My wife and I have lived in the house for a year but spent the first 2 months of ownership doing upgrades and repairs. At some point we lost track of our spending and what was to be $10K-15K in improvements became $30K+ then add in some medical bills and we were suddenly looking at $40K in credit card debt with payments beginning to balloon out of control.

The wisest thing we did was to convert that CC debt into the Home Equity Loan. We now have essentially mortgaged 66% of our home and can afford to make the monthly payments with no problem. But our credit rating dropped a bit due to a few late bills. Further financing is not an option for the next 5-7 years. I think the next step is to set a budget and find savings that don’t compromise our lifestyle too much. The reason we moved to our current location is so we could live the lifestyle we want.

We’re a two-income family with one child. We’ve been married 4 years but never had a budget. This month marks the first time when we’re actually living within our means. However, my wife wants to go part time when our son enters Pre-Kindergarten in a few months. That will put a strain on our finances as not only will we lose half her income, but we’ll also lose her health insurance. This while I am struggling building my hobby (a blog) into a second job with enough extra income to pay down our home equity debt and build up some savings. I’m hoping it’s not unreasonable to ask my wife to continue working full time, even if it means our son will be in day care longer than we would both like.

How can I convince my wife that we need her income and that as much as we’d like to have our son at home with her instead of in Day Care, we have to face reality or severely cut back our lifestyle.

julius

I think a comparison of me and my partner sheds a lot of light on the problem with borrowing to pay for education.

I got a BA from a good University. I owe about $22k on student loans and about $6k on other debts I got while going to school. Now I make about $50k-$60k a year at a good job.

My partner dropped out of college, and has no debt at all. He makes between $35k-$40k working at a coffee shop.

Yes, I make more than him and have a good job, but after taxes and all of my debt bills, he has MORE money to save and for living than I do.

Makes me wonder if college was really worth it.

JohnathanR

I graduated 4 years ago with over $40,000 in debt from a prestigious Ivy League university. I consolidated the loans and pay 3.25% interest on them. I work for a hedge fund on Wall Street and made over $500,000 last year and will make much more this year. I could never have gotten my job without going to a top Ivy League school. By the time I’m 30 I’ll have a couple million in the bank. Anyone who thinks college loans are a waste and you should go to a lesser college is a fool who will one day look back and wonder why they never amounted to anything.

Katiya

I am 36/female/childless and live in the Seattle area!
Basically I am debt free minus $2000 in cc debt. I just transferred that to a no interest credit card and cancelled the other card. I will have that paid off by August 2007.
I went on scholarship to a great university and paid off a decent car in a pretty short amount of time. (Bought my parents 1998 Avalon for blue book value! I don’t care about having a new car anyways. Pointless)
Best thing anyone can do is save for retirement, invest and graduate from a great university. Also don’t run up cc debt. Forget about living beyond your means also.
The only thing I am in slight limbo about is that I rent instead of own a house/ condo. I have all the amenities at my complex so I don’t have to go to the health club etc…Anyhow, I don’t plan on having a child and marriage isn’t a priority so I am thinking renting isn’t so bad for me right now. I max out everything else (investing/retiring/emergency fund) and I manage my money very well and live way below my means except for the rent I pay here. Its worth the trade-off in my view.
I feel for people who are in over the heads for debt. I couldn’t live that way seriously. I made it a point to never be in credit card debt beyond what was reasonable. Anything beyond $3000k is unreasonable credit card debt to me. Everyone is different though.

I Will Teach You To Be Rich » When your debt feels like your arm

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ec

I’m 22 and just starting grad school with a $30k/year stipend. In student loans, I have $5500 at 6.8% and ~$9k at 4.875%… once I get the paperwork straight to get them back into deferral, I will probably just work on the smaller one with the lower balance if there’s anything left after credit-card debt, fully funding a Roth IRA, and rebuilding my emergency cushion. At the beginning of senior year, I had about $5k in savings, but between reduced financial aid (due to parents’ income increasing), slightly higher living expenses, fewer hours available at my job, over $1000 in application costs, moving to a new state, and unexpected car repairs, I’ve accumulated $3500 in credit-card debt. I did, however, reserve enough to float my rent and other expenses for the summer — if I wiped out savings and checking, I’d have around $1500 on the cards. (No debt on the car, but its value is negligible.)

Once my stipend kicks in (or even the rest of my summer earnings), I should be able to knock out the cc debt in a month or two, so intellectually I’m not too worried about it. However, I’ve always paid my cards in full, so emotionally it’s driving me a little crazy. I thought about taking out a short-term personal loan, but the closing costs (or whatever they’re called) would have been a significant chunk of the finance charges I’ve paid over 3-4 months, plus my life was pretty scattered for a few months and I didn’t know how much I’d end up needing.

I am a little disappointed that I worked part-time through college and hoarded any extra financial aid only to end up with debt instead of a cushion at this point, but that will improve soon (partly because I cast a wide, expensive net with grad-school apps).

Even though I accrued some interest by taking more loans than I needed, I felt that I had to be prepared since there wasn’t anyone I could borrow money from in an emergency. In particular, I was concerned about medical expenses and the need to bail my mother out of debt. Both of these things happened — before the mentioned $5k savings milestone, actually — so my concerns were not unfounded. However, if I hadn’t ‘loaned’ her money, she would have just declared bankruptcy a few months earlier and I would have ~3k less in debt.

I guess this is the issue I feel weirdest about, because it isn’t going away — at some point she will have no means of support (no retirement plan/savings, not-so-great health), and I won’t let her become homeless, etc. But I also can’t make her be responsible…

mary

I’m 35 and married (husband is 36). I make a little over 100k/yr and my husband stays home full time with our kid. I own my own business and have a regular 9-5 professional job (so I work 2 jobs total).

I graduated from grad school with 30k in debt. When I was 26 years old and fresh out of grad school I made some smart investments (ie I bought a house) and made $150k off the sale of it. I then paid off my student loan debt (never had credit card debt) and reinvested the rest of the money. I used that reinvested money to pay off our current mortgage in full last December. We have zero debt, and that includes owning 2 cars, a motorcycle, and our house. We never carry a balance on our credit card but you can believe I use it as a free loan every month and put the $ I into an ING account.

I have always contributed to my 401k, since I was 26 years old. I now have over $89,000 in it. My best piece of advice is to start that 401k right after school (even if you start w/ $200/month, which is what I did!) whether you think you can afford it or not. This is KEY. It’s not fun but do it.

anon

Little different story…

I dropped out of college (relative paid tuition) because all the IT tech support jobs kept getting in college would close shop and move to India. Joined the army and got out, had no where to go so i slept in my car and showered at the university gym (apparently I’m a gym member for life paying tuition for years). Got a low paying sales jobs, rented a couch for $100/mo, got a second sales job and rented a room for $350/mo.

While doing business-to-business sales I walked in a real estate office and sold them a bunch of junk. They were so impressed they hired me, paying me hourly while i went to RE school. Did loans for them too in their mortgage office. Figured out how important credit was and slowly paid off some of the smaller debts, and got CD loans to build my score. After two years I could used RE license and high credit score to purchase rehab properties. First house my grandmother gave me the money for 15k. I refinanced a year later for 50k and paid her back. Bought another house few months later for 20 and sold for 35. Now i’m buying a house for 18k that’s worth 70k+, but i’ll probably flip it for 50k.

I don’t even have a steady job and at this rate I’ll be a millionaire before i’m 35. My fiancee is much younger than me and we’ve already started working on her credit, she’ll be a millionaire before she’s 25.

Only debt I have is my mortgage.

HumbledByDebt

Hi Ramit,

Great site! This is a very interesting post. I have enjoyed reading the responses people have given; it’s an interesting psychological study. Sometimes, I want to yell out “Duhh”, and other times I feel guilty because I’ve fallen into similar traps. It’s interesting how my perception of debt has evolved at different stages of my life, and I’ve come full circle to where I abhor debt – it sucks the life out of you, closes options, and robs your peace of mind. To all those who have said that they are fine with their debt, I would suggest you reconsider, and work to get out of debt as quickly as possible. Most likely, at some point, you will wish you didn’t have the anchor tied to your ankle.

Here’s my story. I’m 33 years old, divorced, with a graduate degree, and ~$30K in debt, which thankfully is much less than some people who have replied to your post. The interesting thing about my story is that I had no debt coming out of undergrad, and it’s not because I had scholarships or parents to help pay my way. I worked part time the whole way through undergrad and lived very frugally. It had been ingrained in my head growing up not to get into debt, and I set a goal when I started undergrad to graduate without debt. I achieved that goal. Then came grad school…

In grad school, I still lived frugally, and with a stipend, I didn’t have to take out any loans to make ends meet. However, about this time I started rethinking my attitudes toward debt. Given that I had been working for around $8 per hour as an undergraduate, and now with a degree, I could easily get a job paying 3x – 4x that amount, it occurred to me that taking on debt wasn’t such a bad thing in order to enjoy life a little more, rather than work all the time, especially when I expected to get another multiple increase in pay with a graduate degree. So I relaxed my stance on debt, and took on $15K of student loans, which I justified as being smart since it was 0% interest for the life of the loan. I put the money in the bank to earn interest and thought I was smart to be making money off the loan. My, how things change…

Halfway through grad school, I got married. Turns out it was a bad decision and by the time I was ready to graduate, I was also going through a divorce. Bad timing would be an understatement. Although I had my degree in hand, I also found myself without a job, and no desire to continue in my field of study. I didn’t know what I wanted to do, and quite frankly didn’t want to do anything, because I was depressed about the divorce. And of course, as you guessed it, I was the one who got saddled with the student loan. Since I didn’t have a job, I ended up spending all the loan money that I had been collecting interest on, and had to resort to a credit card to make ends meet. My parents also lent me some money, and add on the child support payments, the total debt ballooned to close to $30K before I was able to pull myself out of my funk, and find a job to get myself back together again. I’m now working to get back in the black, and thank goodness all my loans are 0% interest (I was able to put all my credit card debt in one account using a free automatic transfer with 0% interest the first year). So, while I’m no longer being killed by interest payments, I still don’t like the fact that I’m paying over $1K a month paying off my debts. I could do some very interesting things with that money, but instead I will have to wait. I now understand why my dad drummed into my head while I was growing up to stay out of debt. Sometimes, we have to learn the hard way, rather than listening to those who have already traveled the path.

Take my advice, work a part time job to get through school if you have to, forget about the ski trips, forget about a nice wardrobe, just live simply during school and focus on studying and working hard. You’ll be much happier with no debt hanging over your head, and you’ll be in a great position to start life in the real world. You never know what can happen. Things can be going great, but within 2 or 3 years totally turn for the worst. You don’t want to be further hampered by debt if that ever happens. Debt will make a bad situation unbearable. Don’t fall victim to the lies people will tell you. Anyone recommending a large debt load, especially for undergraduate is only looking out for their own interests, at your expense. And talk about law school! The one post which said the cumulative debt of his graduating class was close to $40M, blew me away. Tell me the university presidents and other university administrators don’t have a conflict of interest! It’s a lie. Take the government loans only if absolutely necessary, but avoid the private loans at all costs. They’re not worth it.

pj

I am 21, one year from graduating with a master in applied economics and have no debt. Actually I have 15K euro saved, but reluctant to put it in the market at the moment (also with the possible outcome of buying a cheap piece of real estate soon).

I am fortunate the system (I live in Europe) and my parents pay for education and living costs, respectively. However, a car, a student room and vacations are not standard living costs. I tackle that by not owning one, tutoring for my student room (and saving 100% of what’s left) and being a ski monitor instead of paying for the ski trips.

Sometimes I do think I work and plan too hard, but that’s just me. I am eager to enter the labor market after graduation. I will either go into management consultancy (I am doing an internship at M/B/B) or join a start-up. Life can be a tough game but I enjoy playing it!

GazelleIntense.com

I have some debt, but I’m working a plan to be rid of it. Dave ramseys plan… it works… its not easy.. .it’s hard work, but over time it works.

Peter

I dropped out of college after one year without any debt. I have since been accepted to 3 major photography schools (sometimes without my knowing) but have not been able to attend because I just can’t get a private (read: non-government) loan for any school. My parents don’t make enough to co-sign, and I have very little credit history. Right now I have ~$300 in credit card debt @ roughly 20% interest (which, in my opinion, is almost criminal, and I don’t even have the massive amounts that many/most people have), and I owe about another $2,000 towards a computer I purchased for my photography work, which is at no interest (borrowed from relative). My spending habits are pretty much awful, as most of it goes towards food or random odds and ends, and while I make enough to pay down this computer in about 3-4 months if I’m smart, the fact is I’m just forgetful and don’t remember to write out the check every month, so it goes for 3-4 months without making the payment, and then I remember it and have to write one big check and take a big hit.

Not sure if this is the best place to ask, but anybody know a good program for keeping track of spending/bills/etc. for Mac? I know what I need to do to get out of the debts I’ve got (obviously, since I’m killing off the very last of my credit card today), but it’s just the organization that I lack. Since a 3/4 of my work time is spent in front of the computer, having something that pops up and says “write a check out for x right now would be very helpful.

Stacey

Age: 24

Credit Card debt: $0
Student Loans: I have no student loans as I was on a full ride at a public university for graphic design.
Miscellanious Debt: $1200 to my parents for my car. Interest free loan that I pay $300/month to them.

JUST yesterday I sent off $4000 in payments to my three credit cards, paying off all of them. I had been wallowing in debt from them since I was 19, mostly because I had used them to buy things I didn’t need (two computers, a couch, video game stuff) and also because I used them to buy things when I could have paid cash (fast food, school books, etc).

I just paid the minimums on these cards throughout college and also while I had my first job out of college. In fact, once I got my first job, I got into even more debt because I felt like I was rich and could buy nice things. I couldn’t, and I bought them on credit anyway (which was stupid). I was making $32,000 a year before taxes and insurance and stuff, and I was buying so much crap.

Then about a year ago I met my boyfriend who has taught me how to save. I moved in with him in June and we are on a tight budget.

We cook all of our meals, spend $400/month on food (costs a bit more because we buy healthy food and fresh produce), don’t really go out much, and don’t buy many extraneous things.

I also got a new job that pays $50,000/year, though I have to take out about 40% of that in self-employment taxes (I am a contractor). However, I keep this money in an interest-bearing savings account and also save more than I need to. (I need to save about $800/month and I manage to save about $1200).

My boyfriend helped me set up a payment plan for my credit cards that would minimize my interest and get them paid off in a year. I was paying about $500/month to them, but I got to the point where I had about $6000 in my savings, and I decided that I would save more money in the long run to just pay off the $4000 I had in CC debt and get it out of my hair, so that’s what I did. My credit cards had terrible interest rates (18%, 21%, 15%) so it was time for them to go. Now I’m saving $500 a month from them and I don’t have to worry about them anymore. I feel great.

I will never have another credit card again, and now I can save even more money each month and start earning even more interest off of what I have saved. It’s exciting.

Tim Allen

My debt started with CD mail order accounts before I graduated high school and even though I managed to avoid the credit card pit with only $1000 on two cards it was the College “scam” that has my head under water. I attended a private college the first year out of high school at $7000 a term. I came off the streets. All poverty got me was student loans.

Disillusionment and misdirection, with a giant whole where mentorship should have been, left me twisting in the wind for 7 years and 5 colleges with 3 different majors. Before I could finish any of the programs I began I ran out of money and had to drop out with a series of reconsolidations the only positive on the horizon. After pooling the 7 years into a pile I’ll spend the next 20 years paying over $80K for nothing; not even a two year degree.

The choices were mine but the knowledge needed to make wise choices is not an award given in a little box that comes with a high school diploma.

T

I am 18 years old and so far owe about 4000$ in personal bank loans. I don’t owe any for mortgage or student loans. Although it isn’t that much I still wish I never got myself into this situation. Originally I got the $5000 loan to pay for my laptop and a trip that I would make payments on and expected to only use about 2500$ on but dwindled away another $1500 on useless items.. I now realize that I need to get it paid off as soon as I can. I am wanting to get a new car, but have made a deal with myself that I am not going to get into any further debt until I get this one paid off. I am trying to make 500 payments on it a month, sometimes more, and am hoping to have it paid in full by September. I have since gotten rid of my credit card, which I would use my loan to pay off, and stopped using money I don’t have to pay for things that I don’t need.

Morning Musing: Debt Breeds More Debt | artofthecoupon.com

[...] what will happen when her husbands student loan debts become due.  Similarly, a lot of people who commented at iwillteachyoutoberich.com got into debt because of their quest to get an education.  This, of [...]

Nicole

I’m a 33 yr. old, single mother of 2 teenage daughters. I have $24,00 in school loans, $19,000 vehicle loan, and about $8000 in credit card debt. My income is only $35,000/ yr and the debt is overwhelming. I have always used a budget….but somehow that isn’t good enough.

Becky

Wow. I guess I’m not alone. I’m 28, and I have $60,000 of student loan debt for both bachelor’s (journalism) and master’s degrees. Add to that $7,000 in credit card debt and $12,000 for a car loan. I was so desperate to pay off my loans that I enlisted for a five year term in the military as a broadcast journalist. I paid off my credit card debt with part of my $12,000 bonus, and now I’m waiting for my loan repayment benefit to kick in (the army pays back up to $65,000 of loan debt – one third of it after each year of service). I’ve only been in for ten months now, so I haven’t seen the first payment yet. Right now I’m just trying to keep up with the accruing interest on my student loans, which totals over $200 a month. Joining the military was a drastic move, but I was serious about getting rid of my debt. I hope that in four years all my debt will be gone, I’ll have money saved, and I’ll hopefully have enough job experience to get a decent paying job in broadcasting as a civilian.

Catherine

Hello my gross list is as follows:

Student loans..around 32K..
CCdebt 5100,4100,7800
Personal Loan 20K
car 1-5800
car2-24K
Savings 17K
ed savings 1K
Annual income…95K
We are on a serious get debt free route…we moved from our beautiful home into a shack of an apartment with our two children to get out of debt and provide for them better. We will buy a new home as soon as this is all cleared up…1 year goal for all debt except student loans.

Michael

The purpose of your debt and how you manage it determine the outcome. I am 25 years old and over one million dollars in debt. However, I don’t let it stress me out or bring negative energy into my life. I am young, successful and determined to live the lifestyle I have envisioned for myself by the age of 30. I am using leverage and maximizing the use of the great credit I have earned through consistent payments on mortgages, auto loans and credit cards. I have been blogging for the past two months on some of the current things I am involved in. Please check it out and leave your comments at: http://www.amillionindebt.blogspot.com/

Tell me a story about your debt « I Will Teach You To Be Rich | Personal Finance and Me

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