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 age 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.
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!