Greetings, readers! Just over a year after launching this blog, I’ve finally roped Daniel into writing a post! I hope you’ll enjoy some more background on his financial story and how he, too, was able to build enough financial security to be comfortable dropping everything to travel the world. – Matt
Back in the early 2000s, at the well-informed and responsible age of seventeen, I took a few tours of college campuses, was impressed by the lovely buildings and manicured lawns, and made the decision to go $23,000 into debt.
Four years later, I graduated with a bachelor’s degree in the highly practical field of European history. As a wide-eyed college student with visions of making the world a more just and equitable place, I went into social service, working primarily with marginalized communities. The work was meaningful and challenging, but as you’d probably expect, it wasn’t exactly the most lucrative.
Over the last six years of full-time work, I earned an average of just $25,000 annually.
For many people, that combination of low salary and high student debt would have been a sentence to decades of financial challenges. But with the right habits, I enjoyed some of the best years of my life, saved a bunch of money, and paid off the entirety of my student loan debt. Here’s how I did it.
I started my career earning very little.
Wait, what? Shouldn’t step one to paying down debt be to earn a lot of money?
It wasn’t for me. For the first two years of my career, I worked with two non-profit organizations via AmeriCorps, the federal program often described as the “domestic Peace Corps.” The program gave me the opportunity to do direct service – exactly what I wanted to be doing – in exchange for about $12,000 per year.
After my fixed expenses, I was left with just $100-150 of discretionary income each month.
That level of income doesn’t allow for a whole lot of splurges, but it does teach you how possible it is to live with less.
Choosing a low-income job (and it certainly was a choice) forced me to question even the most basic “normal” expenses. Living alone wasn’t an option; instead, I spent two years living in community with seven roommates. Owning a car was out of the question; my only reasonable option was to learn how to commute by bike. Dining out, going shopping, and other expensive activities were rarities, too.
Matt talks a big game from time to time about his low spending habits, but when we first met, he was spending 2-3x my annual income! I picked the venues for our first couple dates, which included a by-the-slice pizza place and one of the cheapest dive bars in the city. Do you know what Matt picked for our fourth date? A Seattle bar called Canon, a place that pretentiously describes itself as a “whiskey and bitters emporium,” has been ranked in the top 10 bars in the world, and charges $14 and up for a drink. I think our total was almost $100.
[Matt note: Whoops, it’s true! I’m a jerk. But I still love that bar.]
I embraced simple living.
Living simply wasn’t just a matter of necessity; it became a conscious choice.
Few things helped me reduce my material desires more than my experiences at work, where I spent eight hours a day providing basic services like showers and socks for people who were largely ostracized from society. Many of my clients, lacking even the most basic possessions, weren’t yearning for cable TV or the newest smartphone. They just desired the fundamentals: connections to other people, good health, and meaningful work. After encountering that at work day after day, it was frustrating to be constantly bombarded with media messages trying to convince me that frivolous purchases were of the utmost importance. In my view, society’s priorities were out of alignment.
Every advertisement has basically the same message: “Buying things will make you happy. If you want something, you should buy it. It will feel good! And other people will think more highly of you.” My experiences, though, have taught me that buying things has never increased my long-term happiness. In fact, it’s mostly distracted me from the things that truly make me happy. The more I’ve cared about my possessions or how I appear to others, the more self-conscious and unhappy I’ve been.
Living simply made me feel more aware of myself and connected to the world around me. Commuting to work by bike, for example, came with benefits like daily exercise and more time outside – but it also unintentionally opened the door to personal connections with my clients, many of whom biked out of necessity (even if my lifestyle was a choice).
Simple living also appealed to me as an environmentalist. Society’s message to buy, buy, buy has created a culture in which everything seems disposable. Many of the negative externalities will be felt by the global non-white poor – people like my clients. It’s an overwhelming issue, but my reaction was to incorporate simplicity into my own life and to encourage others to do the same.
I avoided lifestyle inflation when my income grew.
After two years of AmeriCorps, I took a full-time job with a non-profit organization working with low-income people with disabilities. With my first “real” salary, I allowed myself a few modest increases in spending – but only on things I valued. The challenge was to put an aggressive limit on that inflation so that I could achieve my financial goals.
I allowed myself spending increases on three things: travel, food, and drink. All of these activities generally involve socializing with other people. Community remained my first priority.
For other spending categories, I worked to keep expenses low. Rather than move into my own apartment, I continued to live with roommates. I kept my transportation expenses minimal, commuting by bike rather than buy a car or take the bus. I took up travel hacking, taking advantage of credit card sign-up bonuses and opportunities to stay with friends and family. Even with limited spending power, I was able to travel all over the country – from New York to LA, San Francisco, Denver, Minneapolis, and Michigan. Sometimes I even tagged along on Matt’s work trips to enjoy a free hotel; thanks, corporate America!
We use two free tools, Mint and Personal Capital (affiliate link), to track our spending and net worth every month. It helps us keep track of where our money is going – and to adjust when we don’t like what we’re seeing!
I was persistent.
There’s no big secret here. Paying down debt is ultimately about setting goals and sticking to them.
I had the help of one unique benefit from my AmeriCorps service: an end-of-year education award. While I could have waited to use the money for graduate education down the road, I immediately applied it toward my existing loans. In addition to wanting my debt gone, I also wanted to recognize the income while I was in a low tax bracket.
Even after the award, though, I still had five figures of debt. Paying off the remainder of my loans became one of my core focuses.
I evaluated taking advantage of Public Service Loan Forgiveness, a federal program that forgives debt for certain public service employees, including those working for non-profits. In order to meet the requirements, though, I would have needed to commit to service work and drag out regular payments for ten years. While it’s a great fit for many people, I wanted my debt gone as quickly as possible, so I decided to go all-in on a shorter timeline.
If I were doing things again today, I would also explore student loan refinancing. Services like LendEDU (affiliate link) have made it much easier to evaluate refinancing and consolidation options in minutes without having to spend hours working with different lenders, and the savings from a lower rate can add up to a lot of money over time.
Time took care of the rest. I set up regular withdrawals for the beginning of each month to ensure I would stick to my goals. “Paying yourself first” works just as well for debt as it does for saving: when the payments are automatic, you don’t even see or think about the money.
On top of my regular monthly contributions, I also made additional quarterly payments with any money I had left over (aside from a three-month emergency fund that I always maintained). With a few of those extra dollars adding up, I ended up making my last payment just four years after receiving my diploma. Advancing my loan repayment timeline saved me over $5,000 in interest versus making only the minimum payments.
Along the way, I made room for other financial goals. As one example, one of my best friends got engaged and planned a wedding in Ireland. The week I learned about it, I set a goal to eliminate $20 a week of expenses. One year and many more homemade lunches later, I had achieved my goal and banked over $1,000 for the trip.
Once my student loan debt was paid off, I didn’t change my financial habits. With no debt, I made saving money my top financial priority. I took advantage of my employer’s generous 403(b) matching program, too, contributing the maximum I could afford.
I’m still a long way from financial independence. But I didn’t take off on this travel journey with no financial foresight. In addition to being debt-free, I’ve built a solid emergency fund on which I could support myself for at least six months without an income.
I’ll always remember that satisfied feeling I experienced when making my last loan payment. Setting aggressive goals and eliminating my debt was one of the best decisions I’ve ever made. It’s given me the freedom to reach other long-term financial goals and the comfort to take time off to travel. I can’t recommend it more!