So I thought I’d share my debt payoff story. I didn’t think there was much there, but perhaps I don’t give myself enough credit (no pun intended). I just thought – I got into debt when I didn’t have any money; I got out of debt when I did. That’s the overall gist. End of story. And in fact as I got deeper into the recesses of my debt history, it started to get more personal and less finance. I almost didn’t want to publish this part of the journey. But baring our soul through the lens of personal finance is what we do here in the hopes that it will inspire the next person and help that one person feel a little less alone. Read on then if you dare.
Background: The Identity Theft
Between 2016 to 2017, I was a victim of identity theft. Some new credit cards were mailed to an old address and someone stole them out of the mailbox. I had no idea as I still had the old credit cards in my possession. However due to the new chip technology, new credit cards were shipped along with balance transfer checks. Those were stolen as well. From one credit card about $3500 was stolen. With the other credit card about $15,000 was attempted to be stolen. I kept those cards opened and unused because I thought that was what you were supposed to do.
|From Discover during identity theft; had been making $400 payments for a 2 to 3 year pay off, but quickly changed direction after theft.
It took about 6 months for all my accounts to be cleared. I subsequently closed all but one account. Discover Card (no affiliate) was really helpful, and it just required one phone call to report my account compromised. I didn’t close that account in the end but I did lower the limit to $500 and was informed it would not be increased without request.
Debt History: I graduated from grad school in 2007 from a teacher education program. I didn’t go into teaching and couldn’t find a full time job living in southern California. I did however engage in some funemployment opportunities including tutoring at $30/hr; being a production assistant on a movie set for $0/hr + free food; wardrobe assistant $100/day; being an extra $120/ day; substitute teaching $90/day; script supervisor $0/hr + free food and others. They didn’t pay all my bills.
Credit Card Debt: Between 2007 and 2017 I ended up accruing about $10,000 in credit card debt that I revolved around credit cards with 0% interest rates. During My Journey, there were at least several nights where I slept in my car to save money so this debt was not due to lifestyle inflation, per se, just life, I would say, and what I now know to be a careless approach to personal finance.
Private Student Loan Debt: The loan was a teaching forgiveness loan originating at $15,000. Because it was a private loan I couldn’t consolidate it with my other federal student loans. I used it to live off during my periods of unemployment. I didn’t go into teaching and ten years later I owed $20,000. You’ll see in one of the screenshots that I had a payment plan different from the standard repayment to try to keep it from going delinquent. The monthly payment amount varied over the ten years from $25 to $173, as my income changed, to a a few lump sums in 2017.
After the identity theft, it became clear I had to take control of my finances. It was tough seeing my mistakes along with the theft and then having to figure out which debt was mine. Luckily it was not too difficult to discern because on one account they used balance transfer checks which stood out because I never did that. And on the other account they swiped the card which I never did.
There wasn’t one particular strategy I used to pay off $30,000 as this debt followed me for almost a decade. I would say paying it off in 2 years was a combination of a few little things. The first being that when I was finally gainfully employed, I had money left over after monthly expenses. I already had a car that ran well for the most part; my apartment was less than 30% of my net income and the only thing I liked spending my money on was cable and eating out. And even eating out wasn’t breaking the budget.
Things I Did Do:
- Asked for a payment plan for the first 10 years to keep private student loan out of delinquency (2007 to 2017).
- For the credit card debt, when I could I would open new 0% interest credit cards and do balance transfers.
- Once, I asked one of the credit cards to lower my rate from 18.99% to 9.99% and they did that with a simple ask.
- Went back to school to get a better paying job.
- Once had better paying job, saved all my extra money after expenses.
- To be honest, I planned to just go back to the standard repayment plan on the private student loan when I started working again. However, it became harder for me to spend money after I joined the workforce full time because I spent so much of my day time hours working. It was only a 9 to 5, but it was everyday…forever (until I found FIRE).
- I had saved for a down payment on an affordable town home an hour away from when I work. After the identity theft, I felt so exposed. I felt compelled to pay off my debts and close as many accounts as possible.
- Paid more than the minimum on the credit cards. After the theft, did a few lump sums to get them cleared so they could stop haunting me.
- I learned to wait my turn.
- Did not inflate my lifestyle. Before I went back to professional school I was making $18/hr; after graduating I was making $41/hr.
- Didn’t buy a house. It ended up not making sense for me financially after MUCH inner debate and the decision felt more psychologically sound after the theft.
- Didn’t get married and have a lavish wedding.
- Didn’t have a baby.
- Didn’t go on vacation for 2 years and counting. Planned a trip to Peru that I ended up cancelling. Months later planned and cancelled a trip to Mexico.
- Didn’t buy a new car.
- Didn’t get my hair done at $100/week. Ended up cutting it myself with scissors. It looks terrible.
- Didn’t get a smart phone. In fact went a year without a phone.
- For the side hustlers out there, I can admit, I probably could have worked 5 or 6 jobs instead of living off loans, but I didn’t.
- For the strategic student loan borrowers, I would advise not getting a private loan or if you do, creatively roll it into your federal loan. I didn’t do that but wish I had.
Was it worth the sacrifice?
The honest answer is paying down my debt didn’t feel like a sacrifice. I wasn’t used to having that much extra money so I didn’t have a chance to get comfortable with it. I just saved it. As I said, there were times in My Journey that I have slept in my car to save money. That kind of experience never leaves you.
Learning to wait my turn.
One of the lessons I have learned throughout this journey is learning to wait my turn. I’ve learned to live without some things I may desire because I just don’t have the money for it. For example, I would really like to live in a nice house. When I was in the housing market, I was approved for a $400,000 mortgage and boy was I tempted to say forget this budget, I want what I want. I honestly don’t know why I was approved for so much. No matter how I crunched the numbers, there’s no way I could afford that much mortgage! So I’ve just learned to wait my turn. My day will come.
Not getting the $400,000 house keeps me free to look for alternative housing more aligned with my next season of life. Not feeding into the frenzy of the latest adventure/gadget/trend has helped me save money; identify my priorities; and seek what truly suits me. I am learning to wait my turn. On My Early Retirement Journey, I am searching for peace, belonging, and community, and a $400,000 house that I can’t afford or keeping up with the trendy Joneses do not bring me those things. I’ve left the noise and become comfortable with the silence.
My debt journey is why I stick with my job even though most days I feel like just staying in and seeing what happens. The struggle was too recent and some days I think I’m just one mis-step away from being back in that place. I printed the zero- balance letter from my loan and keep it in my cube. It’s been about 9 months now and I barely notice it.