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Let's Do Something New and Talk About How to Handle Debt

   Posted On: November 13, 2013  |    Posted In: Debt  |     Posted by: Broke Millennialยฎ

Today marks two firsts on Broke Millennial. 1) The first guest post, ever. 2) Talking about debt. (Props if you understand the link). I’ll let you get acquainted with one of my favorite personal finance bloggers. Don’t worry, she likes using humor too.

Hey, Broke Millennial readers! I’m the “other Erin” and (original) founder of the blog, Red Debted Stepchild. I’m just like your Erin, but I’m in debt up to my eyeballs and I live on the other side of the country in Portland, Oregon. We have equally great taste in television and we are equally awesome. Nice to meet you!

I’m here visiting you today to talk about debt, something that your Erin doesn’t have any experience with — because she exercised self-control and made good choices. I didn’t do that. I made very immature, very impulsive decisions in my first few years of adulthood, causing me to get in a whole mess of debt, including $38,000 in student loans. Here’s my story:

I started accumulating debt at the Signing for college loansage of 18, when I signed the paperwork for my first student loan. Even with a half scholarship, I needed to cover the other half plus room and board. My first dorm cost almost $7,000 for the 8 months I was there, so it wasn’t cheap. I accepted the maximum amount of loans and still had to make payments on around $800 that wasn’t covered.

Thankfully, I had an interview my first day on campus and I got the job. Working 20 hours a week, I was raking in $450 a month after taxes. Try to contain your jealousy of my baller status.

Also at the age of 18, I applied for my first credit card. There was a pizza involved and I vowed “never to use it unless I had the cash to pay it off immediately”. And I didn’t…until the age of 19, otherwise known as the year I maxed out two credit cards on God knows what.

I moved out of the dorms that first year and into an apartment with a roommate. I took on a second job to pay the rent (a whopping $280 for my half) and began working 35 hours a week. I still took out the maximum amount of loans and didn’t save a dime.

The not saving and taking out as many loans as possible continued through junior year, despite the fact that I was making more money as an accounting intern. Finally, I actually managed to save up $1,200! Which was promptly spent on getting my wisdom teeth cut out without insurance. It seemed a losing battle.

Senior year, I took on another internship during tax season that was making me about $4000 a month AFTER taxes — or more than I have ever made (including after college). I decided to try this saving thing again. I managed to save 25% of my income because I knew I wouldn’t be working my final semester.

After graduation, I signed on for another $10,000 in student loans to start my Master’s program. I quit after my first two semesters, realizing I definitely couldn’t afford it.

And this is where I ended up — $38,000 in the hole from student loans (plus car and credit card debt). I have a degree to show for it (that I currently don’t use) and not much else.

There are a lot of reasons to hate debt — interest payments, limited spending power, limited saving power, etc. — but the thing I hate most is lack of options. My debt holds me back from a lot of things I want to do. Things like moving overseas, traveling more, starting a family, trying ALL the restaurants, having furniture (not all at the same time!). My debt limits what I can do because my minimum payments are almost 4 figures. Almost a grand IF I want to stay in debt for 10 years. And I’m really not interested in that nonsense…

So here’s what’s up, you responsible millennials. Number #1. For the love of God, don’t go into non-mortgage debt unless you are using it for leverage purposes.

Number #2. If you do, take steps to quickly eradicate it. Here’s what I suggest:

  • Hustle, baby! My husband and I are working our butts off to make more. We really prefer making more to spending less so we focus our energy here.
  • Limit the awesomeness. We love food and travel and we continue to spend on both of them. However, we can’t spend excessively so we limit our eating out and keep travel frugal.
  • Embrace minimalism. Like Erin, I’m not the type to forgo all nice things. In fact, I really like nice things. I’m talking about adopting minimalism temporarily to put extra money towards debt. For instance, I live in a studio, I don’t have furniture (seriously, none — my mattress is on the floor), and I don’t really buy anything unnecessary with the exception of an occasional plane ticket or meal out.
  • Sweat the big stuff. I’m sorry, but no one ever got rich by forgoing a $3 cup of coffee. Focus on the big stuff. For example, we are considering going carless. As we recently moved to Portland, we’re waiting to make our final decision after we experience our first winter.
  • Don’t be a fun sucker. If you are splitting finances with someone else, don’t make the process of getting out of debt miserable for them. Balance, young one! You can make great progress on your debt without forgoing everything fun and enjoyable.
  • Read Red Debted Stepchild. Besides the fact that is awesome because I wrote it, it serves as an awesome opossum cautionary tale. Learn from my mistakes, I already touched the stove and it’s really freaking hot.
Red Debted
The one and only Red Debted Stepchild

It was great hanging out with you amazing Broke Millennial readers today! Are you all hyper responsible like Erin or are there any BM *giggles* readers with an indebted past (or present)? It’s okay if you aren’t as baller as Erin, you’re my new best friend anyways. Call me every five minutes.

Be sure to hop over to Erin’s blog to check out the post I wrote for her about avoiding debt!

[Image taken from Buzzfeed & xxhuskywolfx tumblr]

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33 responses to “Let's Do Something New and Talk About How to Handle Debt

  1. My wife and I also have quite a bit of student loan debt that we are paying down. It’s a big reason I started my blog, as I wanted to have side income covering our student loan expense each month. My next goal is to increase my side income so that it covers our mortgage as well. The one positive about debt is that it can motivate you to do things – like start a side hustle – that you might otherwise not do.

  2. Congrats for tackling your debt. Is it bad of me to not think of student loan debt as bad debt? I think education is so important that I look at student loan debt as a must.

    It’s really consumer debt which is the only debt I think that is bad for individuals. Thoughts?

    Sam

    1. I don’t think student loan debt is bad up to a point. If you are racking up a 6 figure debt to work a 30k a year job, that’s a problem. A rule of thumb I remember said you shouldn’t take out more than what you expect to make in salary for your first job. So if you expect to make 40k at your first job, you can rack up 40k in student loans.

      That might be a bit high and I think 50% would be a better gauge. If a person expects to make 40k and they only rack up 20k in debt they’ve built themselves a better cushion. They can come out and accept a job only making 30k and still be in a good situation. This also builds in some error in case their research of market rates are inflated.

  3. It’s crazy to think you were actually making decent money AND had a partial scholarship. It makes me think about the kids who aren’t working and don’t have other kinds of financial aid. Man it’s expensive. It also show just how temped we are to spend without good financial guidance. Happened to me too. There really needs to be like a scared straight program but for financial purposes. Thanks for sharing your story Erin!

    1. Yeah, I can’t even imagine. Don’t get me wrong, I worked really hard to secure my internships (30 to 40 interviews just to get 3!), but a lot of majors don’t offer paid internships at all!

      I could totally scare students straight! “Look at this debt load! Do you want this debt load? I said, DO YOU WANT THIS DEBT LOAD?”

  4. While I never had student loans, I certainly did have credit card debt. I should have never tried to fund a business with those plastic bastards. Lesson learned and now I use debt to leverage my cash. It is working quite well.

  5. I had $38,000 when I graduated as well. And I think Jordann had the same amount too. Must be an unlucky number!

    I’m so glad that my student loans are gone. They gave me such a headache!

  6. I’m glad you remind people that sometimes the big stuff is more important than the small. You have to know your limitations, which I only accepted after years of stress and guilt.

    That said, remember that a $3 cup of coffee a day is over $1,000 in a year so… Then again, I’m not a coffee drinker. I don’t have to fight the lure.

  7. Yeah, I rarely buy coffee out. In fact, I don’t pay for it at all (buying it out or at the store to brew at home) during the week. I drink free coffee from my apartment building on weekdays :).

    But I also don’t stress about an occasional latte. I’d rather focus on the big stuff than the minutiae.

  8. Limiting the awesomeness is so important like you say Erin. I just went on a honeymoon with my husband to the Caribbean and while I really enjoyed the all-inclusive experience, it’s unrealistic to think we can do another one of those trips for quite some time. We can still go to the beach, just a much closer one that unfortunately won’t have lounge served piรฑa coladas! But it’ll still be fun. ๐Ÿ™‚

  9. Great post Erin! I never had student loan debt, but credit card debt? Yup! First credit card at 18? Yup! ๐Ÿ™‚

    BTW, you are living in one of my favorite cities! I love Portland!

  10. Thanks for sharing your story, Erin. So many people overlook scholarships. They can make a huge difference. I still believe college is a good investment and am saving for my girls but I see so many kids head off to school willing to take on substantial debt without a real awareness of what that means. I’m so glad that there is such a strong and growing millennial voice, such as you and … well, the other Erin ๐Ÿ™‚ who are openly talking about finances and being money smart.

  11. Great post! I am all about hustling and not being a fun sucker. I don’t want to be the girl that’s always saying ‘no’, so it makes me work harder. Debt sucks, and it’s a process that will kick your ass….but you will be triumphant. I also worked all throughout college and still ended up with so much debt!

  12. Love the “sweat the big stuff” attitude. Small wins can be helpful if they’re applied consistently and with little effort, but it’s the big wins that really get you where you want to go. I also love that you’re willing to spend on things you actually care about (travel) and completely cut out the things you don’t care about (furniture). That’s some badassness (badassnicity?) we could all use a little more of.

  13. Don’t discount the ‘pennies’ you’re spending. For years I barely went paycheck to paycheck with NO debt, no family to care for etc. Do budget and keep track of your expenses. That 3 buck latte might be more than you think, especially if it’s not the only thing you snack on in a day and you’re doing it often ๐Ÿ˜‰

    Keep up the good work on the debt payment, hope to hear good news soon.

    1. I actually don’t do the latte thing on a regular basis. Maybe once a month. I’m more of a black coffee girl, which my apartment complex provides for free during the week.

      Our biggest “pennies” expense is frequent trips to the grocery store. We’re working on that ๐Ÿ™‚

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