Black is the New Red

Black Friday. The day that those traditionally operating at financial loss, “in the red,” turn to profit. One week into my challenge to obliterate my student loan debt. Finding my way to the black.

 

A Short-lived Pre-contemplation

On the Saturday night that I first decided to take on this challenge I thought to myself, “this is perfect timing… I’ll start at the beginning of 2015.” I like clean data, and a fresh year would provide that tidy starting point. As I developed my thoughts around the issue more over the weekend, a sense of urgency began to nag at me. “Ok, perhaps I should start December 1st” – still a decently-clean point of departure at the beginning of a month. I began my week as usual, purchasing meals at lunchtime and even my first (and last) “red cup” of the season at Starbucks. With each meal, I noted the convenience of handing over payment for another’s work in preparing my food. I experienced a moment of rather serious self-doubt. “Can I really have my ish together enough to sustain myself with meals almost exclusively prepared at home?” Maybe I’ve bitten off more than I can chew. Writer’s note: puns – especially bad ones – are always intended.

“I Say, Captain, Do You Hear Something?”

Tick-tock, tick-tock. One of my favorite across-species behavior comparisons is that of humans and crocodiles. A crocodile’s life essentially revolves around regulating its temperature. It situates itself in a place with the ideal conditions of light, shade and water, making choices relative to other conditions around it – threats, prey, etc. A crocodile will not move from its resting place until it has unequivocally determined that an oncoming threat outweighs the benefit of remaining in place. Anyone who has consumed a large amount of liquid before bed on a winter night can relate to this decision-making process.

Not only do I notice this in the human world as we navigate decisions based upon risk or threat, but also that there is a significant discrepancy in perception as to the severity that said threats need to achieve before action is necessary. Essentially, everyone is responsible for determining when to slither off their warm rock and relocate to a safer place. Some of us see the hunter in the distance and decide it’s time to mobilize. Some of us wait until the spear has pierced the flesh (also affectionately known as “rock bottom”).

So, how does this apply to my current situation? Although my debt was neither larger than before nor increasing at an accelerated rate, my increased awareness had changed my perception – and the threat had become abundantly clear. By Thursday afternoon, I was all-in. On my way home from work, I strolled those Trader Joes aisles so hard and hit that frozen section for ICE (In Case of Emergency) like my life depended on it.

 

Nothing Tastes Better than Freedom

When I got home, I began preparing and planning my meals for the week. I felt like I had spent a small fortune at Trader Joes, so I developed a system to keep myself accountable to my grocery expenses. My hand-written “Freedom Food Chart” includes dates and amounts of grocery expenses, number of meals prepared from said expenses and the resulting per-meal cost. Early calculations had me cruising at $17.80 per meal. Fast forward two days, I’ve got the average down to $8.90. As I replenish my grocery supplies and prepare meals, I will continue keeping track with the goal of getting meals down to $3 each. This will involve focused waste-avoidance – i.e. I will no longer discard the yolks of my eggs – and some creative meal planning.

Something about this particular method of goal-setting is tapping into my sparkly-star-sticker-chart-loving child. And I love it.

What I haven’t loved so much is the formerly-welcomed conversations of wining, dining, travel and “the best concert ever that will be in town soon.” Normally these conversations with my friends have me energized and wanting to jump in on every proposed plan put on the table. Now that there’s an absolution of non-inclusion for myself, I have to redirect my enthusiasm exclusively to the support of their fun and enjoyment. This isn’t always easy and was mildly painful at first (and that’s probably an understatement). But I’m starting to notice that focusing outside myself has started to shift the way I experience the world around me in other ways. Even in this short amount of time, my focus on the happiness of others rather than my own immediate gratification has led to things like passing up the best parking spots at the market for someone else to enjoy and valuing kind words from a stranger more than I have in a very long time.

These past many years, I’ve asserted without hesitation that living in Los Angeles has hardened my heart. I’m starting to wonder if the city really is to blame…

I Literally Can’t Even

$117,897 in student loan debt. And if I continue at the rate I am going, I will never pay it off. Ever.  

Let’s Take a Journey

The year is 2010 and I am 28 years old. I have earned my MSW from University of Southern California and am excited to embark on a meaningful career with a wide array of possibilities. I have six-figures of student loan debt and my ever-rose-tinted glasses gazing upon the future.

Directly following graduation, I was hired part-time by a non-profit to complete the pilot project I began in my internship and transition it into an ongoing program. I was also performing part-time at the Happiest Place on Earth, which I had also been doing throughout grad school. My social work position paid enough to cover my fairly modest expenses (thank you to dear friends who took me in as an additional roommate), and the dance position covered barely more than the gas it took me to get to Anaheim.

Let it be known: my Financial IQ was incredibly low at this point. I had always understood the importance of saving and the unsettling concept of paying back loans with interest. For this reason, I had always been very careful to avoid taking on any debt – I completed my undergraduate education debt-free and paid cash for the only car I’ve ever owned. I did not fully understand the long-term implications of taking on such a hefty sum of student loans. “People do this all the time, right?” Upon graduating from USC, I explored my options and decided that the best thing for me at the time was to enroll in income-based repay, set up my autopayment, and plan my monthly budget accordingly.

So, Here We Are

2014. It does not take a rocket scientist or otherwise arithmetically-inclined professional to figure out that the payments I’ve been making each month are not even enough to cover the interest accruing on my student loans. At this rate, I will never pay off my debt.

But was I really aware of this? No. I had employed the ever-popular Ostrich Method of financial planning, where I just kept on top of my day-to-day without taking the time to step back and crunch the actual numbers. It was not until I began looking into some “next steps” in my life – the bigger picture – that I began to pull these pieces together. It was time to take a look at my student loans.

Egad. I discovered that my amount owed was going up instead of down. “What? Why? How?” You might ask… “could you not know this was happening?” Now, I remind you, my financial literacy left much to be desired and I had resigned to the fact that I would either a) have my loans forgiven after 25 years of IBR or b) work 10 years in my service profession. But I did not realize that my loans were becoming so wildly out of control that I would essentially have no choice but to do one of these two things. And then one day – let’s call it “today” – I pulled my head out of the sand. I opened my eyes to how significantly this impacts my freedom. Not to mention, if I ever want to enter a legally-binding relationship, I cannot in good conscience bring this with me. And I need a good conscience.

If I am ever to get to a place where I am financially free, I need to take some immediate action.

I started to brainstorm about ways to work towards this goal. I decided that taking on an additional part-time job was probably a good idea. But it was still going to be a long road. Enter: The Internet. Late one evening, I began to explore. I had no destination in mind but found myself drawn to financial planning discussions. I happened upon the blog, “No More Harvard Debt.” The model was simple: Cut Costs, Increase revenue. What the …! This guy successfully paid off his $90,000 debt in 7 months. And his situation doesn’t seem so different than mine. It was the first time I’ve felt like I could actually do something about my situation.

Granted, my debt is higher and my income is lower – but the important piece here is that I experienced a long-forgotten feeling: hope. His goal was 10 months and he accomplished it in 7. (Mad props, Joe). I can do something significant too.  

Shoot for the Moon

Even the most generous math does not indicate that I will arrive to $0 debt by December 2015. There are many variables in play that remain to be seen. But I am excited, nay energized to see how far I can get. At this point, I am thinking I will take a 3-tiered approach. The first tier will be Now-May 2015. This will involve a spending freeze and additional work to supplement my income. When my apartment lease ends in May, I may move. My office is relocating and it will greatly impact my commute. It is also very possible I will need a new(er) car. My ’97 4Runner is a noble steed – my trusty sidekick – but the gas mileage and maintenance may become an unreasonable financial drain. These factors, combined with my assessment of the progress will influence the structure of the next tier, June-December. My goal by the end of tier 2 is to reduce my debt by at least 50%. Still lofty? Perhaps. But I do know myself – and I will be charging ahead at 110% and will be happy even to “land among the stars.” Tier 3 will be 2016 and beyond – at whatever pace I see appropriate when the time comes.  

Scoreboard

Current payoff totals and interest rates. Listed in order of repay.

Graduate Plus – 8.25% – $35,407.95

Stafford – 6.55% – $80,356.09

Perkins – 5% – $2,133.10

Strategy

Cutting Costs

Simple enough. I shall put my trust in hedonic adaptation: maintaining a stable level of happiness in spite of drastic change. I have tightened up my belt before and was just fine. I have every material object I could possibly need. I will engage in a spending freeze. I’ve accepted the fact that I will be returning to my natural hair color. No travel. No mani/pedis. No dining/drinking out. It will take major habit changes to get myself exclusively eating from home and taking lunch to work. As for drinks, enter: the flask. Fortunately, Los Angeles has many free offerings for entertainment – and I’m going to become “one with them.”

Increasing Revenue

Increasing revenue will be hard work, but I think I can do it. I’ve always had a tendency to keep many irons in the fire (ideally, not “too many”). I enjoy a challenge. That said, it is absolutely necessary that any additional work does not impede on my ability to excel in my current position. I realize that I am very fortunate to have a salaried position that rarely requires more than 40 hours of my time per week. Many of my peers work for companies that require far longer hours – and though I know I already exert a lot of energy at work, I can do more. And I believe I will benefit personally and professionally by engaging in new and varied opportunities. It absolutely must be a positive work environment and I would love to do something that involves physical activity. Current brainstorm on this topic: teach dance in the evenings or work weekends/evenings in fitness-related business. Bartending? Per diem medical social work? There are many options, each with their own up- and down-sides. I aim to secure a position by January.

Happily Ever After?

This blog will follow my journey as I aggressively work to slay this dragon of debt. Will it work? Will I reach my goals? Will I lose my mind? I’m excited and nervous. And I’m glad you’re with me.