Category Archives: Three-Post Explanation

If I Could Start Over

Day 8 | $0 paid | $90,717 till freedom

Knowing what I know now, I would do things a lot differently if I could go back in time to graduation day. I’d live like a pauper, beginning on Day One. Super cheap used car (like, $5k max), a rented room, $100 monthly entertainment budget, extra job. No mortgage? No car payments? I would’ve burned that $101k rather quickly.

So Why Didn’t I?
A little bit about me–I come from a family that respects the value of money–almost to a fault. My dad got his mechanical engineering degree from an Ivy, he has two masters degrees,  and he’s a successful executive in the automotive industry. Money was never tight–or at least my parents never let me know if it was.

And while money never appeared to be tight, it never got thrown around, either. My mom bought my clothes at Kohl’s (until college, at which point I bought them). If I wanted name brand, I had to pay for it myself. My mom spent her Saturday mornings clipping coupons. Every single Saturday evening–without fail, no exaggerations–we went to mass followed by dinner at Olive Garden, Red Lobster, or some similarly priced restaurant. Besides those dinners and only a handful of small family vacations (read: Grandma’s house), that was basically the full extent of entertainment provided by Mom & Dad, Inc. while I was growing up. And I wasn’t one of those kids with eighty different gaming consoles. I had a gameboy with about three games in addition to the home computer.

My dad is extremely careful with money, and he has gone to lengths to try to instill that value within me. It took him two weeks and a couple of trips to K-Mart before he finally bought me a bicycle when I was five. When I outgrew that, he paid for a second bike a few years later. On the car ride home after the second shopping trip, he told me that that would be the last bike he ever paid for.  Four years later, when I was 15, I worked 40 hours a week for an entire summer bagging groceries at Kroger so that I could buy a fairly high-end bike. I ended up using it every day at college, from freshman through senior year.

I’d be remiss if I didn’t mention the racing kart my dad bought me when we lived in Italy. We had moved there for my dad’s job when I was 13 and I was having what could be considered a “tough time” adjusting to life in a foreign country away from my American friends. I broke into and robbed the school store, I smoked cigarettes, and I brought an airsoft handgun to the school dance. After the last incident, the headmaster advised my dad to get me into some sort of father-son hobby immediately so that I had a reason to love Italy. My dad wisely chose kart racing, and that took care of the problem. (It took my dad two weeks to buy an $80 bicycle, so I can’t even tell you how many weeks/months it took him to pick out that kart.)

Before and after Italy, entertainment was generated by bike rides, outdoor games with the neighborhood kids, and trying my hand at 2-player PlayStation games at my friends’ houses. Unfortunately, I was horrible at PlayStation because I didn’t have my own,  so nobody ever wanted to play with me and I turned into that kid who just sits on the couch and watches his friend have all the fun. It was horrible.

God and family came first at home while I was growing up, but money got its fair share of respect, too.

What’s Money?
I don’t know exactly when it all changed for me, but at some point, I stopped respecting the value of money.

It certainly wasn’t in undergrad. I was a student athlete and had no time to make money, so I monitored every dime I spent. Mom and Dad were funding tuition, rowing, and living expenses, and entertainment and clothes didn’t count as living expenses.

It certainly wasn’t during my years immediately following undergrad, either, when I worked as a supervisor in a factory. I decided the bonuses and raises of my blue-collar staff so I knew how little they made and I saw how many of them were living paycheck to paycheck. In addition, the factory was constantly under the threat of being outsourced and offshored. Between these two influences, I never felt fat and happy, and was always watching my back for that tap on the shoulder that signals the beginning of a lay-off. I treated myself to a used Honda S2000, but never traveled and never ate at nice restaurants. I rented a room from one of my colleagues who owned a house. I had a very healthy Screw You fund.

I guess I have to chalk up my new perception of money to HBS. Actually, scratch that–let me put the onus on myself and shift the locus of control internally. I have to chalk up my new perception of money to the way I allowed myself to be influenced by HBS.

HBS is awesome. Simply awesome. If you ever get the chance to attend, do it. If you ever get the chance just to visit, do it. HBS will forever hold a special place in my heart. There aren’t enough gigabytes on this blog to list all the reasons to attend HBS.

But I let HBS influence the way I interact with money. At HBS, $100 dinners (for one person) in downtown Boston are a standard affair. Nobody thinks twice about taking an international vacation–they just go. I remember a friend  told me she was going with a group of students to Oktoberfest for the weekend. I asked her what bar she was heading to. She laughed at me and told me the bars in Germany–she was going to the actual Oktoberfest–for the weekend! At HBS, many students come from family money,  have already made a fortune on their own, or are going to make a lot of money when they graduate. Some students fit all three descriptions.

$100 dinners? I think our entire bill at Olive Garden was typically about $30, and that was thanks to my mom’s coupons. International vacations? We left Italy only five times when we lived there, and that’s with our house being fewer than three hours from the border. My S2000? Hah! One guy at HBS cashed in some tech stock when he was 18–right before the bubble burst–and bought a brand new M3 with the proceeds.  Kohl’s? Try Gucci, D&G, and Armani.

Some of my new friends made as much in a bad year as my dad did in his best year.

While my friends back in Austin admired a good pair of dark-wash jeans, my new friends admired completely bespoke $12,000 suits. You know, the ones where the buttons on the cuffs of the blazer are actually functional? Yeah, neither did I.

So why couldn’t I buy a $5,000 car, rent a room, and pay down all my debt in a year when I graduated in June 2009?

Seriously? Given the context, is that question even relevant anymore?

My new peer group would judge the hell out of me. And dammit, they went to Harvard and I went to Harvard, too. If they can live like that, then I can live like that, too.

My friend was just in town and he told me that he’s making $250,000 per year as a consultant. He bought a Porsche 911 turbo the other day. With cash.

Another friend of mine has an M6 and a penthouse in downtown San Francisco.

Supposedly–and I have no reason to be skeptical–one of our peers is clearing about a million dollars annually on Wall Street working in private equity.

(BTW, I want to state  for the record that I’m sincerely proud of all of these guys. They’re incredibly smart and talented, and I hope they find even more success in their lives than they already have. They completely deserve it, and I’m rooting for them.)

Oh, and lest anybody should forget, the 43rd President of the United States of America went to Harvard Business School.

And what about my old friends? I went off to “Hahvahd”–I better not come back and live like I did before I went there. I better upgrade everything–car, house, clothes–everything has to be at least one tier better. After all, I went to Harvard. The societal pressure to look it and act it is huge.

So I got back to Austin, and I tried it out. Instead of going small and paying off the debt in a year, I went fairly big–I got a house, two cars, and a motorcycle–all within one 18 months of graduating. Up until last weekend, I was going on $150 dates.

In no way am I in over my head–I can afford this lifestyle and the standard student loan payments. I have been line-iteming my finances the whole time, and I even took the time to establish a budget, but since haven’t had any real financial goals (until recently), there have never been any consequences for exceeding my budget; I have just been making sure to avoid an unsustainable position.

Time to Change!
I don’t think I can point to one isolated event that has happened recently and consider it a wake-up call, a call to action, if you will. But for all the reasons I listed on this post, enough’s enough–I want to be rid of these loans.

Cue soapbox: A lot of people in this country–regardless of socioeconomic status–have an unhealthy obsession with things and experiences and statuses. We shop brands, we drop names. We try to keep up with the Joneses. We comfortably tolerate an unhealthy level of debt.

I started this blog when I was writing a cover letter to apply for a weekend delivery job. I took a step back and it wasn’t until I stopped laughing at myself that I realized others might enjoy laughing at me, too. So I wrote an introduction, pasted in the cover letter, came up with an appropriate domain name, and launched the blog.

The blog started as a joke. I had every intention of following through on my challenge when I started it, but I wanted to let people be amused by it and get a laugh at it, too. I hope they still do, but a lot of the comments have actually turned the joke of a blog into an inspiration.

Soapbox off. I don’t want to preach about consumption anymore because I’m just as guilty as the next guy, if not more so. But for the next ten months, I’m going to try to set an example. I’m going to try to get back to some core values. I’m going to try to unload $90k in debt by cutting costs and increasing revenue.

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Why I’m Doing It This Way

Day 8 | $0 paid | $90,717 till freedom

Why I’m not consulting on the side to make extra money
Yawn! If I wanted to do consulting, I would’ve interviewed with McKinsey, BCG, or Bain for a full-time position. I work a desk job fifty hours a week–I don’t want to work a desk-job on the weekend and during the nights, too. I want a change of pace. I want to get out of my comfort zone. I want to do something different. I want to get away from the stuffy white-collar business for a moment and take a deep breath of life. I want to pull drunk people around downtown with my bike and a trailer.

Why I won’t sell off my cars to pay down the debt
The idea behind this challenge is to cut costs and increase revenue to pay off my loans. If I can do that and keep the cars, then I get to keep some useful/critical assets on my balance sheet and maintain positive net worth.

The idea behind this is challenge is not to be completely asset-poor by the time I pay off my loans–I want to have positive net worth, not zero net worth. I already cashed out some of my assets–my IRA and stocks–to pay down some of my debt. If I sell off the cars to pay down the debt, then yes, I get closer to claiming victory over my challenge. However, I absolutely have to have a car, so I’ll have to go straight to the credit union after I make my last student loan payment to take out an auto loan, which sounds a bit self-defeating.

Why I will never monetize this blog
You’ll never see ads on this blog (while I still have loans to pay) because I don’t want to make money “unnaturally.” I want to pay off these student loans by cutting costs and increasing revenue through hard work, not through sensationalism. A Harvard MBA who make a modest tech salary has vowed to pay down his 10-to-15-year $90k in student loans in 10 months. That sounds somewhat sensational, and yes, the stats for this blog do have a slight hint of the viral in them (considering I have done zero promotion for this blog, other than posting a link on my FB wall).

I could probably promote this more and make a few bucks by hosting ads and putting those funds towards my student loans, but I don’t want to. I want to prove that crazy ideas and brand names don’t pay off debt–good old-fashioned belt-tightening and some elbow grease do.

(At least that’s what I hope.)

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Why I’m Doing It

Day 8 | $0 paid | $90,717 till freedom

Why am I willing to make sacrifices to cut my costs and increase revenue to be student loan-free in 10 months?

To Have Freedom
I want to achieve my dream. My long-term goal has always been to own my own business, and that’s what I told the admissions counselor during my HBS interview. However, it’s hard enough to bootstrap a start-up with cash for everyday operations without adding student loan obligations to the mix. Imagine that for a minute–not being able to achieve the dreams that I hoped to achieve by going to HBS because of the financial obligation I owe to the creditors who allowed me to go to HBS. Ironic.

I want the option to get off the treadmill. The Verve put it best: “You’re a slave to money then you die.” By taking a stand against my debt, I’m demanding an exit from that treadmill. I like my job and I enjoy going to work every day, but I’ll bet there are a lot of jobs that don’t pay six-figures and are more fun than what I do now.

I don’t want to my job choice dictated by the salary so that I can maintain my lifestyle and still make monthly $1,057 student loan payments. I want to broaden my choices.  I want to go to a start-up and see what’s it’s like before I take the plunge myself. The start-up jobs that I’ve heard about rarely pay six figures.

I want the option to get off treadmill in a major way. There is an extremely, extremely low probability that I would ever do it, but I want the ability to sell off all of my stuff and just leave, just walk away from everything. I’m guessing this desire stems from the fact that before I was 14 years old, I lived in five states, two countries, and moved seven times. The thought of having to stay in one place and work a six-figure job just to make ends meet, and cannot, at any one point, walk away from it all without getting into serious trouble with the government seems a bit…stifling. If I can shed the student loans, then I have options. The value of my house has stayed flat if not appreciated since I purchased it and started paying down the mortgage over a year ago, so I can cash out of that (and pay off the $8k new homebuyer credit) and walk away and not owe anybody anything. But as long as I have student loans–which I cannot directly cash out–I’m stuck.

To Save $42k in Interest
I borrowed $95,610k. The ten-year notes carry a monthly charge of $871, or $104,520 over the life of the loans. The 15-year notes carry a monthly charge of $186, or $$33,480. So once my loans are paid off, I will have paid $138,000 even, or $42,390 in interest.

$42k in today’s dollars, in tomorrow’s dollars, in 15 years from now’s dollars–it’s a lot. It’s the start of a solid college fund for my future kids. It’s a dent in my current mortgage. it’s a used Dodge Viper, a boat, or a down payment on a vacation house.

But right now, it’s all spoken for by the loans if I keep making my standard monthly payment.

What a waste.

To Pay for My Kids’ College Educations
I want to have kids by the time I’m 35. My parents started saving for my undergrad when I was born, and my only personal expenses at Michigan were related to entertainment. Mom and Dad picked up the tuition, living expenses, and the rowing team. Thanks, Mom and Dad!

I can’t imagine spending $1,057 every month on HBS when I’m 36 and have kids’ college accounts to fund. That money should be going to their college education, not mine.

To Do More
I have a buddy who makes about as much as I do. He owns a house near me and like me, he has two cars and a motorcycle. We make roughly the same. It took me a while to figure out how he can afford to take several international trips a year, and still party as much as he does. And then it dawned on me–he doesn’t pay $1,057 a month in student loans! Heck, if I took two months off of paying my student loans, $2,100 could buy a plane ticket to a fairly exotic country. Take another couple months off, and my vacation is fully funded! Do that three times, and I just went on three international vacations in a year!

To Pay Off an Intangible
Student loans are a strange animal. Unlike a payment towards a car loan or a mortgage, a student loan payment doesn’t go towards something that is benefitting me in a direct way. Yes, my salary basically doubled when I graduated from HBS and got a job because HBS provided me with the skills and knowledge that allow me to add more value in my career than I otherwise could have without HBS. And because my salary doubled, my lifestyle improved. But the connection between HBS, the student loan payment, and my lifestyle is a harder one to make than something as simple as “My $500 car payment allows me to drive my BMW this month.” (Not that a loan on a depreciating asset is ever a good idea.)

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