No More Harvard Debt

Happy Fourth, everybody! I hope you’re enjoying the lake/beach/pool/park today–I’m headed over to a pool party in a bit, but wanted to blast out a quick post about zeroscaping, or as I like to call it, frugalscaping.

The first and only major expense since I paid off my student loans occurred in April, right after paying off the last of loans. I spent $1,800 on landscaping–but this wasn’t just about yard  beautification.

During the first weekend of April, I took delivery of 26 tons of 1.5″ washed river gravel, 3.5 tons of Hill Country white boulders, and a quarter-ton of black star gravel. And then I zeroscaped.

I mowed my lawn with the mower on the lowest setting, killed the grass with weed killer, capped most of the sprinkler heads, laid down the thickest weed barrier that money could buy, bordered the flower beds with boulders, and spread the gravel…all 26 tons, over my front and back yard, all in one three-day weekend.

The landscaping business that Michael and I ran specialized in this type of landscaping, so it only made sense to get high on my own supply.

The $1,800 is an investment. Here’s why–

Costs for a grassy yard in Austin:

• Watering: $150/month (conservative by some estimates)
• Mowing: $20/hour/week (I cut my own grass when I had it, but if I value my free-time at $20/hour, then this is a fair way to dollarize the task of mowing)
• Fertilizer: $50/year

If there are six months of watering and mowing–April-September, conservatively–then that’s $900 in watering, $500 in mowing, and $50 in fertilizer for a total of $1,450. I literally haven’t turned my sprinklers on since I turned them off back in September to pay back my student loans.

With a balance of $350 after taking away $1,450 from $1,800, I’ll recoup my costs in the first two months of next season, and then it’s pure upside from there on out. The ROI helps because I did it all by myself–I can imagine a company charging $4k+ to do this, stretching out the payback period by several seasons.

Here are some pics of the backyard with the project 90% complete. Note that my yard was severely neglected since I stopped watering and fertilizing it in September and since I knew I was going to be razing it all as soon as I paid off my loans.

 

 

Weed barrier down. Just add gravel.

This is the “after.” Before I moved 26 tons of gravel with it, the edge was actually straight!

 

Another benefit was reclaiming floor and wall space in my garage after selling my lawn mower and fertilizer spreaders.

On Saturday, I hit the gym and worked on legs for a couple of hours. It was brutal and my legs are still sore, but I left the gym on a runner’s high. My gym membership at Gold’s is $325 for a year, so that work-out cost less than a $1.

On Saturday night, I met up with a group of friends at my buddy’s house to watch the Pacquiao-Bradley debacle. (What the %($# were the judges thinking??) $10 to my buddy for the PPV fight and $6 for the six-pack I brought over and shared. It was an awesome fight to watch, and althought definitely dejected by the judges’ blindness/corruption, we hung out for an hour afterwards just kicking it and having some solid conversation.

On this Sunday afternoon, I hit up Barton Springs with the fellas ($3 admission) and enjoyed the beautiful weather in this early Austin summer. We got in some swimming and chilled out. Unfortunately, my buddy did not get that girl’s number.

After a couple of hours at Barton Springs, we picked up some delicious burgers at P. Terry’s ($10), then hit up Kasbah and smoked a Blue Mist hookah outside on the deck ($5) and enjoyed a couple of beers ($3) and weather ($0) at this BYOB establishment. A couple of lines from Andy Samberg and Chris Parnell’s “Lazy Sunday” played in my head at some point during the day.

All in, I spent $38 for a very relaxing, very memorable weekend.

Key ingredients for a good weekend: Awesome work-out, great friends, beautiful weather, delicious food, flavored tobacco, and cold beer.

My budget now allows me to spend more than this on entertainment, but when the key ingredients are that simple, what’s the point?

What a killer weekend! Is the work-week here already??

I’ve gotten a ton of requests for the spreadsheet, so here’s a more efficient way to disseminate it.

NMHD – Template

I’ve left my numbers in it to make it more intuitive than a bunch of formulas.

Good luck!

So it looks like I’ve traded in my old-school megaphone for a microphone attached to some monster amps and six-foot tall speakers that I’d expect to find at a musical festival like Austin City Limits. What was once a fireside chat about my own personal journey to pay down my debt now has much greater reach than ever before and is evolving into something…different.

And here I was thinking I was completely done with the blogosphere when I posted the video back in April. Each post takes anywhere from one to three hours to type, and I was looking forward to getting some free-time back in my schedule. Then, some remarks I read online last week forced me to define the target audience for my blog, so I had to write the Poster Child post. Then I thought I could finally wash my hands of this blog.

But my conscience won’t let me. I’ve received so many questions asking for advice that I haven’t had time to respond to a single one. I’m still trying to build my career (putting in ~50 hours a week), and hit the gym every day, and maintain my friendships, so I just haven’t had time to respond with some thoughtful, personal advice. I file all of the questions away in a folder in my Outlook with every intention of getting to them when I finally have some free-time, but that hasn’t happened yet. Well, I can’t put it off any longer—there’s this one comment that somebody made on my blog, a comment that my conscience won’t let me force out of my head:

 I’m still hoping you might share what you would tell yourself, if you could write a letter to your 22 year old self, prior to accepting the student loan money. I believe education is a great investment, but could you have done your Harvard MBA on fewer loan dollars, or with a part time job, or spending less on your ‘wants’ ?

It appears that there’s unfinished business. After reading the comments on the blog and the emails in my inbox, it almost feels like I have a responsibility to help people. So many readers have asked me for my spreadsheet (which I’m happy to provide, btw—just email me), but beyond that, people have written to me saying that they don’t “trust” financial advisors to steer them in the right direction, and they think I can do a better job of it.

So, yes, this blog is evolving into something different. I don’t know exactly what I mean by different, but this blog shouldn’t be about me anymore. I’ve been in the trenches, I’ve done my time, and I wrote an admittedly self-centered story about the entire experience. Now it’s time to look outward and try to help others. That feels like the natural evolution of what I’m doing here, and it’s something my conscience and I want to do, anyway, so let’s do it.

Here’s the deal, though, folks: I’m no expert. I’m not a licensed financial adviser, and a lot of what I did was psychological, anyway–nothing financially fancy, I just tricked my mind into not buying useless stuff, convinced myself I was better off selling some stuff rather than owning it, and searched for fulfillment in different experiences rather than the same old expensive ones. But just like I’m not a professional financial guru, I’m not a trained psychologist, either. So read my advice, but keep in mind that you might be getting what you pay for!

That said, while my credibility is not to be found in the certifications and diplomas in personal finance and psychology that do not hang from my wall, the credibility comes from the fact that I made some really, really foolish financial decisions in my life, I got wrapped up in a certain lifestyle, I saw the error of my ways, I repented, I reacted, I sought and found renewal, and I survived to share the story. And now I’m building up my wealth instead of paying down my debt (and it feels a HELL of a lot better).

So, with that said, let me answer that question that has sparked the evolution of this blog. What would I tell the 22-year-old me who signed up for $101k of student loans?

Well, I was actually 23 when I was accepted into HBS and 24 when I got the loans, but that’s beside the point. And in fact, I actually want to back up further, to when I was 17 and applying to undergrad. Now, my parents had committed to paying for undergrad. In fact, I literally remember asking my dad when I was like seven or eight if he would foot the bill to Yale. Somehow, at that young and impressionable age, I knew that Ivy schools were a big deal. And I remember asking him if he’d pay for it even if it cost $100k. Don’t ask me how the hell I remember this, and feel free to call BS, but I swear (!), I swear this conversation went down. And good old Dad laughed at me and said yep, he’d foot the bill.

Well, I went to Michigan where I was charged in-state tuition, something like $9k/year, so Dad got lucky.

Anyway, the fact of the matter is that I knew my dad would pay for undergrad, but I was still extremely careful about my post-undergrad prospects. I had a dream to fly planes. I wanted to fly 747s internationally. I thought that that would be the coolest job ever. The prestige, the adrenaline—it seemed like a dream job. Growing up, I didn’t go on many trips involving planes, but the best part of those rare trips was never the destination—the best parts occurred at the beginning and end of the trips, on the plane. The exhilaration of being pinned to the back of my seat by the raw acceleration during take-off, the sight of the miniature houses and cars below as we climbed into the sky, and the scary-but-awesome landings—those are the parts of the trip that I got excited about.

Making a career out of it seemed like a foregone conclusion. For one of my birthdays, my parents paid for me to go up in a four-passenger plane with an instructor just so I could be sure that that’s what I really wanted. When we were airborne and cruising, the instructor let me take the stick and I did some simple maneuvers. My heart rate was probably at around 200 BPM, my palms were sweaty, and I loved it.

Then I talked to my uncle who works ina aeorspace and he put me in touch with commercial pilots to talk career prospects. And what I found out was far from reassuring. The path to being a highly paid intercontinental pilot isn’t as straightforward as I had hoped. Many times, people who get their degree in aviation as part of a college program will get their private pilot’s license, but then they have to buy seat time on an airplane to accumulate thousands of hours before an airline will even consider hiring them. They serve as flight instructors on the side to earn that flying time, and the money is simply not there. I’m recalling $20k/year being the number that some of the people I talked to threw around.

The alternative to this low-dollar alternative is to join the Air Force and put in hours on the cargo planes and get paid to get those hours. So I went that route. I went to a public school, the University of Michigan, and I did Air Force ROTC during my freshman year. But what I found is that while my eyesight was good enough for a commercial airline, it wasn’t good enough for ROTC, and they wouldn’t consider me as a pilot.  After several meetings with my counselor and her superior and a second eye examination, they just couldn’t clear me to take a pilot path.

At that point I had two options: I could either go to a school that specializes in aviation and then go through the private path, or I could give up the dream.

I gave up the dream.

Even at age 17, I knew that I wanted a certain income. In my case, it wasn’t a certain income to pay off my student loans, since I didn’t have any. In my case, I sought financial stability. I knew I didn’t want to be poor. So I looked around at what program could provide me with financial stability after graduating, and it was a toss-up between the engineering school and the business school. Both listed $50k+ beginning salaries for most undergrads. I tried an Engineering class and decided it wasn’t for me, so I applied to the business school and got in for my junior and senior year. I graduated and got a job as a factory supervisor where I made over $50k/year plus bonus.

Was I high up in the clouds, flying planes? No. I was working in a factory on the night shift from 4 PM to 3 AM Monday through Friday, sometimes even through Sunday. I was donning steel-toed boots every day and leading a team of 30+ material handlers in a desktop computer manufacturing plant. My “cockpit” was a factory and my “passengers” were my direct reports. Adrenaline and excitement were in short supply, but money wasn’t.

I haven’t thought about the decision I made 12 years ago until this past week, since I’ve been confronted with the problem of students graduating with high loans and limited job prospects.

I try to live my life without regrets, but I’ll be honest—a part of me does regret the decision I made. Flying planes really would be cooler than what I do these days. But would I be making as much money? On the other hand, should financial stability ever trump somebody’s dream?

I think it comes down to one’s personal values.

So let me answer the original question. If I’m 17 and I’m thinking about taking out loans to go to school, what should I evaluate?

First off, it’s extremely easy to get a loan to attend college these days—that’s probably why the cost of college is going up so steeply; the banks are giving away the money, so the elasticity of demand for a college education is extremely low because everybody can find the money (typically borrowed) to pay for it.

So, the question is, what does one do with that easy-to-get loan? If their dream aligns with a career that our country desperately needs (e.g. engineering, nursing, etc.) and the expected salary is in profile with the loan, then go for it. I’m not going to explicitly define what I mean by “in profile” here—it’s basically a euphemism for “don’t get so laden with debt that you can’t dig out of it.” Find out what the monthly payments on your debt are, calculate what your living expenses will be, find out what your expected salary will likely be, then determine how quickly you can pay that debt off when you graduate.

Now, if the prospective student’s dream is something that’s not necessarily in high demand and has dubious salary expectations, like the oft-cited English major, then reconsider. I’m not saying don’t study English, I’m not saying value money and income ahead of your passion—I’m not saying do what I did. By all means, pursue your passion. Or you could end up like me.

But maybe avoid studying English at the priciest institutions. Or minor in it and major in something that’s in high-demand. Try starting out at community college and earn some cheap credits, then upgrade to something higher-end.

Yes, you can almost definitely get $100k from the bank to pay for an English degree. But I don’t think you should ask for that much.

(It seems silly to me, actually, that banks don’t require that the student declare their major when applying for a student loan. “Here, Johnny! Here’s $100k to go study underwater basket weaving at UBWS (Underwater Basket Weaving School). I know there are many Fortune 50 companies out there who will be happy to pay you at least $250k when you graduate for your unique skills, and you’ll get a signing bonus and relocation, too. So live it up! The interest rate on your 30-year loans is only 25%, so repay at your convenience.”)

And of course you should be living frugally if you have a loan. Like I said in a prior post, a new car and daily Starbucks are not to be staples of your lifestyle.

Beyond college, there are always trade schools to consider. Or, Peter Theil will pay you to drop out of school and start your own business.

So what would I tell the old me? I was fairly risk-averse back then and I wanted financial stability, and I put those values ahead of my dream to fly planes. Looking back, yeah, I probably should have flown planes. But hindsight is always 20/20.

So if you’re graduating high school, have an honest talk with yourself about your values—what are you passionate about? What gets you excited? And what kind of money are you likely to make if you follow your dreams? Is it enough to pay back your loans with? Can you survive on it? Are you willing to make the sacrifices to live a frugal lifestyle if you’re unable to land a high-income job?

Let’s fast forward and answer the original original question. I’m 24, I’ve been accepted to HBS. What do I do? I do exactly what I did. Average starting salary out of HBS for the class of 2007 was, what, somewhere in the neighborhood of the low six figures, high fives? I would sign. I’d do it all over again. And no, I wouldn’t work a part-time job, no, I wouldn’t spend less money on my wants, and no, I wouldn’t ask for a smaller loan. I’d do it all over again. I wouldn’t skimp on the experience. I wouldn’t go to Europe every weekend, but I’d go on certain trips, and I’d take advantage of certain things, and I’d try to surround myself with my peers instead of going off and working a part-time job. Those two years are critical years for immersion in the MBA program, and trying to aggressively nickel-and-dime it simply isn’t necessary when the starting salary has six figures in it. 

What I would do differently is alter my post-grad lifestyle dramatically. I wrote about that here.

Taking out $100k to go to a third or even a second-tier business school should give the borrower pause. The employment prospects are more of a gamble in this situation—yes, of course it’s possible to land a high-paying job without graduating from the top five or ten programs or whatever, but it’s not as likely, and for that reason, those schools can’t boast of an average starting salary of six figures, so the loan request should be tempered accordingly. A part-time job might be a good consideration, too.

It’s 1 AM here in Austin, I’m completely exhausted, and I really should be fast asleep. However, I feel like there’s something that I must address before another work week–or work-seeking week, as is the case for (too) many people–gets under way.

Within the past six days, my story has been featured in media outlets such as WSJ, CNN/Fortune, Huffington Post, and Yahoo! Finance. It all started last Tuesday with an innocuous interview with John Byrne for a small website called Poetsandquants.com, a site that caters to pre-MBA individuals. The fit between his site and my story seemed obvious and I was excited to do the interview.

His piece got syndicated by Fortune, and then it got picked up by other Big Media firms. My blog went from getting about 300 hits a day to tens of  thousands.

Over the past few days, my inbox has been flooded with hundreds of emails thanking me for being an inspiration; some folks have asked for advice on how they can do the same thing.

When I started this blog, I wanted to write a low-key story to entertain close friends and family with my journey. I never promoted my blog anywhere save for a status update on my Facebook for the first five posts and the capstone.

I never thought I would be successful in paying down my debt within ten months, but I thought that I would have fun failing and let others have fun at my expense along the way.

But then I succeeded. Wildly. I saved and sold like I never thought I’d be able to. And over a month after succeeding, my blog was cast into the spotlight of the general public, a far cry from my original target market.

I’ve found that there are three main groups of people reacting to my story. The first group is comprised of people who are very similiar to my own demographic. They understand, for the most part, what the blog came to be about. Outside my close friends and family, the people in this group are my original target market.

From a fellow alum:

Hi Joe,

I am HBS ’08.  I just read the article about your quest, and had to send a note of congrats.  I took a very similar path out of school, and seem to be one of the few debt-free members of my class.  

 At any rate, rate congrats again and great job on the blog.

 <censored>

This email below is just one of the many I received from my former classmates and sectionmates:

Joe, why stop now? Keep going and pay off my HBS debt as well. That would make a great philanthropic story.  🙂

Awesome story, congratulations.

<censored>

To those who say that anybody making six figures can easily pay down their five-figure student loan within seven months, think again. The gentleman who sent the note above is a consultant for one of the top three (Bain/BCG/McK)–he didn’t exactly go non-profit, and is likely pulling down more than $150k/year. These are the folks to whom I was trying to tell my story.

The second group is comprised of people in (sometimes dramatically) different situations than my own that have been able to find inspiration from my blog:

I just finished reading your blog while sitting at work and honestly I’ve never been more motivated to try and get my life back together and fix the financial train wreck I’ve spent my self into. I’m 25 with 2 kids and I’ve been in the process of getting divorced for the last 3 years. Between my own irresponsible spending, credit cards and student loans, and the number my soon-to-be ex-wife has done on my credit I couldn’t even get financing for a pair of used tennis shoes. I’ve been reading articles from “get-out-of-debt” experts for several months now but they all seem so abstract and cliche, obviously not written by people who’ve been there and had that depressing feeling you get from a stack of bills and debt that’s as much as you make in a year. It’s really inspiring to see someone with the willpower to make a goal and stick with it like you did, I’m going to try to adapt what you did to my situation, I only hope can be half as disciplined as you are. 

 Thank you for the example and the inspiration, good luck with your future endeavors.

<censored>

I have a love-hate relationship with the email directly above. On the one hand, I love that I could inspire this man to turn his finances around even though we have such little in common. On the other hand, I hate the situation that he currently finds himself in, and my heart goes out to him and I wish him all the best in the world. I hope he meets success.

The third and final group is made up of people who are also in a different situation than mine, read the articles, consider my earnings and assets, and throw their hands up in the air and ask in completely understandable frustration and anger, “Why is this news? How does this help me?”

University costs are rising at an astronomical rate. Stafford rates are set to double to 6.8%. The job market sucks, with only one in two recent grads able to find work. How does a story about somebody making six figures with toys in his garage and money in the bank help the “average” grad?

For example, how does it help this person who emailed me yesterday?

Hello,

What if I only make $35,000 a year before taxes.  There is no possible way I can erase my $115,000 student loans. 

<censored>

Or this person, who emailed me this morning?

Good Morning!

 I read your story on Yahoo today and it was inspiring and quite impressive! I am also working on my MBA and will graduate with close to $120,000K in student loans (including undergrad).  I currently work full time and although I am blessed to have a job, it is relatively low paying. 

 I moved back home to try to save some money, but even then I am still struggling to make the minimum payments on my undergraduate student loans. What advise do you have?

Any ideas?

<censored>

To be honest, I’m afraid I don’t have any ideas. This person obviously took the right step to move back in with her parents rather than rent an apartment, and I have to assume she looked for a better job, but couldn’t find one. As far as next steps go, I really don’t have any ideas.  I’m deeply sympathetic to her plight, and if I knew what to say I would say it, but I just don’t. I’m sorry.

There’s a lot of anger in this country right now. And unfortunately, I’ve been asked to be the poster child and pose as a solution to rising university costs, rising student loan interest rates, and diminished job prospects. But making six figures as a single guy in a cheap city, I simply don’t fit the bill.

I’ll gladly sign up to be the poster child for gainfully employed, brainwashed over-spenders who need to be inspired to develop the right mindset to freedom-fight their way out of debt and get off the treadmill via frugality and anti-consumerism.

But a solution to a deep, multi-layered, interdependent problem? It is most certainly not “go find a six-figure job.” The solution is to fix the economy, put education costs back in check, and provide a low-interest funding mechanism to improve accessibility to education.

How do we do that? There are no easy answers, and I’m not going to make the slightest conjecture on how we go about righting the ship.

What I do know is that students have a duty to fulfill throughout all of this. They owe it to themselves and the rest of this country to pursue majors that have consistently proven to be high-ROI and to practice personal accountability and live below their means (e.g., no Starbucks and new cars) until their debt is paid off.

In the meantime, folks, we need more screen sharing of this and this and less of this.

Thanks and  goodnight!

I put together a short and simple film about the challenge. It’s only four minutes long and I made it in Movie Maker–the free movie-making software.

The style of the film follows that of The Amish Project that I blogged about in January. I was struck by the power of the film and even back then, I toyed with the idea of doing a video about my own story using the same concept.

One of my HBS classmates who lives here in Austin was a film major in undergrad and he wanted to turn my challenge into a documentary; he took the footage that I’ve used in this short film. We did a lot of filming in the first month, but a lot of that footage got corrupted and we  decided to stop filming after month one, so there won’t be a documentary.

I hope you enjoy it!

Day 214 | $90,717 paid | $0 till freedom

On August 29th, 2011, seven months ago to the day, I went online to check the balance of my student debt. I graduated from Harvard Business School with my MBA and $101k of student debt in May 2009 and I had made 21 monthly loan payments of $1,057 since then. I was expecting to see a balance of around $80k or so.

I had failed to take interest into account; the balance actually stood at $90,717.

Feeling trapped, I challenged myself to pay off my student debt within ten months.

I had no idea how I was going to do it. I didn’t have a huge stockpile of cash, my 12-month salary after tax was less than the balance of my loans, and the ten-month timeline was completely arbitrary. I had a mortgage on my house and two cars and a motorcycle, and I had become accustomed to spending $1,300 per month on entertainment. I wouldn’t say I was living above my means, but I certainly wasn’t living below them, either. And other than maintaining a six-month Screw You Fund, contributing 10% of my paycheck to my 401k, and making sure I could pay off my monthly credit card balance, I wasn’t thinking much about my financial future.

So with no good ideas about how to proceed with the challenge, I put almost all of my life savings towards the $91k. It barely made a dent. Needing to do more, I decreased expenses and  increased revenue.

During the past seven months, I haven’t gone on a single dinner date or been to the movies. I took a flask with me every time I went out with friends, I stopped contributing to my 401k, I didn’t go home for Christmas, and I missed my friends’ bachelor parties and weddings. I got better at DIY and figured out things like how to use duct tape to repair my car and zip-ties to repair my house.

In the past seven months, I haven’t bought a single article of clothing or a single “must-have” gadget or gizmo. I’ve completely eschewed consumerism, and it actually felt pretty good.

To make extra money, I rented my spare bedrooms to strangers on Craigslist, I tried pedi-cabbing, and I started a landscaping business.

I sold my second car, my motorcycle, my roadbike, and a bunch of random junk on Craigslist. I got rid of things that I thought I could never live without, and it actually felt pretty good.

I’ll admit that I did feel a self-described (and self-induced) “funk” from time to time, and I became frustrated when my standard of living dipped a bit, but my cost of living dipped disproportionately more, and I ultimately found that life can still be beautiful without spending a lot of money.

On Day 17 of the challenge, I made the comment on this blog that the only other time I had ever felt this alive was when I was a student-athlete rowing on the crew team at the University of Michigan. 197 days later, that comment is as true today as it was then.

And today, on Day 214, I submitted a final payment to the Federal Student Aid website to pay down the last of my debt.

It Wasn’t Rocket Science
While flasking it up and skipping out on Christmas were effective ways to decrease expenses, those activities were merely the product of internal and external forces.

Internally, there were the standard ingredients like commitment, patience, and discipline.

Externally, I think the blog itself was actually quite effective in helping me achieve my goal. I can literally count on one hand the number of times I’ve ever flaked out on anything in my life, and while I complained from time to time about how uncomfortable it was to relive moments from especially difficult days by writing about them on my blog, I believe that making this challenge public was helpful to my follow-through. I’d say that the Hawthorne effect was probably alive and well throughout this challenge.

So I’ll take this opportunity now to thank those who commented on my blog. To have complete strangers in my corner right there along with my friends and family was incredible. At first, the attention and the rally cries and occasional criticisms posted in response to my write-ups were a little overwhelming and created a lot of unwanted pressure, but I eventually came to value the feedback, and the overall support was really just another important factor that ultimately helped me meet this challenge. So thank you very much for your encouragement and engagement! 

I’ll admit that luck also had a lot to do with it–I didn’t experience any major or even minor disasters over the past seven months. My car did get randomly towed and–unrelated–a couple of old moving violations came back to haunt me, but on the whole, unanticipated expenses were minimal. My house and all of its appliances behaved themselves, my car never needed a major repair, I stayed employed, and I didn’t get sick or injured which could have resulted in an expensive hospital bill. Life didn’t really throw me any serious curveballs. My mom says that God had a hand in all of it.

Finally, there were definitely some contextual factors at play here. My income was higher than the average household income of $50k and I lived in a city that has a relatively low cost of living. I was also single and childless, so the lifestyle changes I made were generally victimless.

Looking back, I’d say that I was in the perfect situation to pay down my loan at an accelerated rate, and while my achievement might seem remarkable at first blush, I’d say the recipe, while not necessarily easy to follow, is fairly straightforward and likely adaptable to many other people’s situations.

I’m Just Cash-Poor
So let’s take stock of my assets. While I’ve sold some of them off, I still have the ones that are important to me:

•  As cliché as it sounds, I still have my health. Throughout this challenge, I made it to the gym an average of four and a half times a week. Nothing is worth the sacrifice of health.
• Again, as cliché as it sounds, I still have my friends and family. Throughout my money-saving and money-generating ventures, I never did anything to lose the respect of anyone I cared about.
• I have one (1) single vehicle and a couple of years paid down on my mortgage.
• I have $1,469 in cash and $46k in my 401k.

A Shopping Spree Awaits! Or Not.
After I regain my cash cushion over the next few months, what comes next? I’ll have an extra $1,057 burning a hole in my pocket every month, so it’ll be time to finance a slightly used Porsche 911 or something, right? Let me answer that question in a round-about way.

It was quite coincidental–but I think perfectly appropriate–that the pay-off of my debt matched the seasonality of the calendar year that I experienced while growing up in the north. I started this blog in late August as the summer was coming to an end. It was time for me to put away my toys and stop spending money so frivolously.

In October, with $30k paid off, the smell of fall was in the air and everybody was getting excited for cooler temperatures, the changing colors of the leaves, and football. I was excited to pay off my student debt.

In December, with winter settling in and the cold becoming a harsh reality, it came time to put on some layers and hunker down. I was still paying down my debt at an accelerated rate, but the novelty had worn off a bit.

Now, spring has arrived and there’s a rebirth. The loan is paid off, the air is warm and alive with the sounds of chirping birds, and girls are wearing sundresses. Everything’s going to be okay.

Spring is a transformational time, and so was paying down my debt.

For the 15 months leading up to my NMHD challenge, I was spending an average of $7,754 per month, and that figure excludes my student loan payments. During the past seven months, the average has been $3,129.

During the past seven months, I’ve kept track of the various expenses I’ve deferred for the sake of paying my loan off early (e.g., new running shoes, a car phone charger, printer cartridge, etc.). Last week, looking ahead to when I’ll reinstate some purchasing power, I categorized the deferred expenses into four groups: things I need to buy immediately, things to buy within the next one to three months, things to buy in four months or later, and things I can probably do without for the rest of my life.

I know in two weeks I’ll get a paycheck, and  two weeks after that, I’ll get another one. And unless I really start sucking at my job, the economy goes belly-up, or the company falls apart, I’ll probably continue to get a steady stream of paychecks for awhile.

Nevertheless, I put most of those deferred expenses into the last two groups. I’m just not looking forward to buying stuff again. In other words, no, I don’t think it’s time for a 911.

But why not?

Based on the ten-month outlook and assuming I maintain my current course and speed, I’ll have almost $15k in savings by the end of June, which is month ten. What that means is that I never had to sell my second car or the motorcycle or a bunch of stuff on Craigslist in order to hit the month-ten goal.

Along this same vein, one might say that at the end of September, instead of paying down $30k on my loan like I did, I could have invested the money in something as simple as a Dow Jones index, which had nowhere to go but up, and ridden the 21% gravy train from September 26th to March 23rd to net $6k. Doing so would have allowed me to keep some of the stuff I sold.

The thing is, I don’t actually regret selling any of that stuff.

I spent the first two months of the challenge trying to convince myself that my debt should be paid down organically, not by selling off assets, but in the end–and I don’t know exactly what happened inside my head–I decided to sell my second car and motorcycle. And when I made that decision, it felt like a burden was lifted from my shoulders, and I even went on to sell other stuff I didn’t need like my roadbike and other miscellaneous junk.

So do I look forward to getting more stuff or flashier stuff in my life? Am I on eBay Motors shopping for a Porsche? Not at all. Things like the ink cartridge and the new running shoes will replace my empty cartridge and worn out running shoes, so I’ll net out to having the same number of stuff in my life. For that reason, those things went into the second category, the things I’ll purchase in one to three months. The phone charger? I put that in the “never” category. I don’t think I drive enough to need it, so I can’t justify adding that clutter to my life.

I’ve learned to be content with the things I already have.

So What Does Await?
During the past seven months, I’ve gone from one guard rail to the other. While I don’t want to continue to be as frugal as I have been over the past seven months, I don’t want to go back to the way I had been living before that, either. I believe life becomes optimized somewhere between an extremely frugal state and a financially wreckless state; a happy medium exists somewhere between spending and saving money. But where exactly is that medium?

I used to spend my money and wonder, why not? As long as I maintain a six-month Screw You Fund, contribute to my 401k, and pay off my credit card every month, why not spend the money? I’ll keep working in this job–whether I like it or not–because it pays the bills and allows me to maintain a certain standard of living.

Now I’m thinking big-picture. Back-of-the-envelope, 15-second math using the most basic assumptions indicates that I’ll have $1M in savings by the time I’m 49. I can retire and live frugally off the interest and/or get a more meaningful job. That calculation doesn’t include the very material impacts of potential bonuses and cost-of-living and performance raises, investment decisions, and the mortgage pay-off; including those assumptions would only pull in the date that much more. Sure, there will be certain expenses like children and maybe a bigger house at some point that will offset some of those excluded gains, and one could always argue that $1M isn’t enough to retire on–especially with inflation–but I think that high-level, the key takeaway is clear: If I continue to live a somewhat frugal lifestyle, make the right decisions, and stay in Lady Luck’s good graces, I won’t have to work till I’m 65.

So every dollar I spend on non-essentials today is a trade-off that will bear itself out far into the future: the new car, the bigger house, the cruise, the 60″ 1080p LCD TV–those all equate to extra days I’ll have to work. And balancing the pros and cons of decisions like buying the car/house/vacation/toy versus retiring early is extremely difficult because of the timing of the gratification–humans naturally prioritize near-term experiences over long-term ones.

And early retirement might not be what I’m looking for–I’m not yet convinced that it is–maybe it’s starting a business or doing something humanitarian. Either way, trade-offs exist between what I really want to do with my life and the things that I might want to buy.

D.T. Suzuki wraps up his book Introduction to Zen Buddhism with a fairly ominous warning about Buddhist monks who put themselves to the test in the real world after having spent years living and studying at the monastery: “It is no longer imperative for [the monk] to remain in the Zendo; on the contrary, his intellectual attainments must be put on trial by coming into actual contact with the world…Many serpents and adders are waiting at the porch, and if one fails to trample them down effectively, they raise their heads again and the whole edifice of moral culture built up in vision may collapse even in a day.”

When I was living in the admittedly constrained world of NMHD, there was no paradox of choice. 9.9 times out of 10, the answer to the question of whether I could buy something was simply no. I had little anxiety about buying things because I simply couldn’t afford anything.

But now I’m opening up the door to the monastery and I’m venturing out into the real world with my new purchasing power and I have real decisions to make that affect not only my day-to-day life, but my future 20+ years from now. Truthfully, a part of me wants to cower inside the monastery and attack my mortgage next and avoid the serpents and adders, the really weighty financial decisions that threaten to collapse my newfound frugal nature.

But I know that the real world has more to offer than the monastery, and I’m excited to embrace it and to search for that happy medium.

To freedom!

Day 214 | $90,717 paid | $0 till freedom

Today’s the day where I pay down the remainder of my student loan debt! Three months early…hard to believe it.

Here’s how March played out:

• Starting Cash: $2,000
• Starting Student Debt: $23,211
• Income: $26,094
• Expenses: $3,278
• Cash Paid to Debt: $23,348
• Accumulated Interest: $132
• Ending Debt: $0!
• Ending Cash: $1,469
• Total Assets: $57,243
• Total Liabilities: $0!
• Net Worth: $57,257

The thermometer: complete!

The student debt spiked down nicely three months early.

High-Level Analysis
I spent a whopping  $779 over my March budget, mainly on entertainment, car fuel, and groceries, but I also took in close to $7,000 more than I expected, so it’s all relative. I’m not saying I get a pass on the overspend, and frankly, most of it is very frustrating, but it’s going to be hard for me to get too upset about that when I’m ending this challenging three months early.

The cash buffer of $1,469 represents $1,441 for my mortgage due on Monday, so really, I’ll have about $28 in savings after I pay my  mortgage on the 1st of the month, and I won’t get my next paycheck until the 12th. Yikes! I remember wanting to have a cash buffer of something obscene like $3,500 when I first started this challenge. Man, I really wanted to be fat and happy back then. It’s funny how high my threshold for risk has gone since then.

 Assessment of Expenses and Revenue
I want to take a moment to assess my spending habits on a line-item basis. Progress-to-date is detailed in the spreadsheet below. Click once to open and once to zoom.

Analysis: Expenses

• Insurance — $109 — after paying $0 in January and February when I should have actually been paying something, I got hit with a  $109 catch-up payment. Odd. Anyway, it’ll go back down to $72 in April–far better than the $171 it used to be every month prior to selling the Murano and removing collision coverage on the S2000.
• Internet — $57 — This is typically $51. I can’t explain the $6 jump right now, but I’ll look into it if it happens again in April.
• Cell phone – $86 — I budgeted for $86, so this is in-line with expectations. I’ve been monitoring my usage and have been careful not to exceed my minutes.
• Mortgage — $1441 — Fixed and within budget.
• Haircut — $0 — I get haircuts every six weeks and this turned out to be an off-month.
• Energy — $30 — Same story as last month: I budgeted for $100, so this is a huge win no matter how you look at it. This is due to the colder months and the fact that the energy-sucking AC hasn’t been on.
• Water — $57 — I budgeted for $100, so this is a win.
• Gas — $35 — A loss relative to my $22 budget. This has gone up due to the cooler winter months and is being offset by a lower electricity bill since I haven’t been running my AC.
• Entertainment — $312 — A loss relative to my budget of $50. Some of this is due to the $25/night parking at SxSW, which I attended for three nights. I never really did get my entertainment spend under control during this challenge, but I vastly improved from the $1,300+ I had gotten used to spending prior to NMHD. My worst month was the first month at $525, and my best month was the month right after that one at $157. Otherwise, it hovered at a $300 or so average.
• Groceries — $444 — A loss relative to my $280 budget. Very interesting that this is exactly what I spent last month–to the dollar.
• Lunch at work— $24 — A loss relative to my $0  budget. This was comprised of three on-campus lunches to catch up with friends.
• Fuel — $214— A loss relative to my budget of $160. I found myself driving downtown a bit more than usual this month between SxSW and runs around Town Lake. The increased cost of fuel didn’t help, either.
• Drycleaning – $52 — A loss relative to my budget of $20, but that $20 assumed I’d be ironing my shirts during NMHD, which I’ve so far refused to do. I also took the opportunity to go through my closet at the end of winter and get everything drycleaned that I wouldn’t be wearing this spring/summer due to higher temperatures.
• Car – $10 — A loss relative to my budget of $0. I had to buy some oil to top off my car.
• Unbudgeted — $410 — This is comprised of $255 for my traffic ticket that I got a year ago, $5 for the cashier’s check to pay the ticket with, and the $150 security deposit refund for Sarah when she moved out.

My expenses for the past six months averaged $3,129, while my expenses during the 15 months prior to NMHD averaged $7,754. I’ve been spending $4,625 less per month, on average, since I started this challenge.

Analysis: Revenue

• Salary/Bonus — $23,694 — A win relative to my budget of $17,006. It should be noticed that this includes three paychecks as well as my annual bonus, which turned out to  be much larger than expected.
• Tax Return — $1,872 — A win relative to my budget of 1,292. I made a guess what my tax return would be when I started this challenge, and not surprisingly, I was off by several hundred.
• Roommates — $400 — A loss relative to my budget of $850, but that’s because the roommate paid for April in March, and I recognized the revenue in that month.
• Escrow Surplus — $112 — A win relative to my budget of  $0. I definitely wasn’t expecting this.
• Lottery — $16 — A win relative to my budget of $0. This was earnings from my scratch-off stocking stuffers that I finally cashed.

So That’s It
I’m used to this section being titled something like “January Outlook” or “February Outlook.” If I hadn’t gotten the bonus, I’d be writing about my April Outlook. But I guess I don’t have to…

I’m still in shock. This is…a little sad. Bittersweet, actually, at the risk of sounding completely cliché. On the one hand, it was a struggle, a battle that I thought was worth fighting, so I stuck with it. And after completing one of these monthly progress reports, I almost always looked forward to the next month of challenges. Still, I’m definitely glad to be done with my student loans.

For what it’s worth, here’s the full ten-month outlook (click once to open, once to zoom), assuming I were to continue to live as frugally as I have been. I don’t necessarily plan to, but more on that in the next post.

Day 199 | $67,506 paid | $23,211 till freedom

I had my performance review with my boss today and it went extremely well. Between my higher-than-expected bonus, the fact that it’s a three-paycheck month, my income tax return, my roommates’ rent payments, and my escrow return–and assuming I don’t experience any major disasters and my tax calculations are accurate–I’ll barely be able to pay off the rest of my student debt at the end of the month!

I’m still in shock, and I won’t breath completely easy until the money’s in the bank, but it looks like this adventure is drawing to a successful and early close.

Today’s performance review had been on my calendar since Monday. This morning, I woke up with nothing but this meeting on my mind. In fact, I’ve been thinking about it since the third post of this blog. By definition, the bonus has been a major source of ambiguity, a major unknown that would greatly influence–either positively or negatively–the success of this debt paydown mission.

A couple minutes before my 3:00 performance review, my boss texted me the room number–no “hi” or “hello,” just the alpha-numeric name of the meeting room. My stomach did a somersault.

At 3:00, I walked into the tiny meeting room. My boss had a couple pieces of paper out in front of him turned upside down on the table. We greeted each other, and he asked me if I had any business-as-usual items to discuss. There was a number of things going on, unfortunately, so we talked through them for 15 excruciating minutes before he finally said, “Ok, let’s get down to the end-of-year stuff.”

I thought to myself, “Stuff? Stuff?!” So much was riding on this moment, on that piece of paper–it was so much more than just “stuff!” My freedom was hanging in the balance!

My boss flipped over a piece of paper with a bunch of numbers printed all over it. I’ve seen enough of these forms to know that it was the sheet with my bonus information on it (as opposed to the other sheet that contained my written performance review).

On the sheet was my base salary and the various calculations that explained the final number, the bonus. I scanned the page quickly, searching for the bonus figure, trying to restrain myself, trying not look like a wild hyena going in the kill. It took every once of willpower to sit back and try to appear calm and cool instead of lunging for the piece of paper, pinning it down to the table with both hands, and poring all over it in search of the bonus.

When I finally located the bonus amount from my calm and cool seated position, I blinked a couple of times–I couldn’t believe it. I had run a ton of sensitivity analysis by changing various assumptions, and even the most bullish analysis didn’t predicted that it would be as high as it was.

I tried to think back to my pro forma and what this meant in terms of my debt paydown, but I had a hard time remembering all of the inputs. It wasn’t until I got home four hours later that I finally saw that with accurate tax assumptions and a continuance of my frugal lifestyle, I could kill the remaining debt at the end of the month when I get the bonus in my paycheck.

I’ve always been insecure about this bonus. I had done solid work as a product line manager for the  first three quarters of the year, and if I had stayed on for a fourth quarter in that role, I was guaranteed a great bonus. When I intead chose to search for a new job and ended up getting a promotion in Q4, I spent all of Q4 ramping up.

The increase in salary that came with the promotion wouldn’t be enough to offset a limited or non-existent bonus. I knew I wouldn’t be able to impress my boss since I was so new, but I knew he was the one who would decide my bonus for the entire year. All I could do was not give him a reason to give me a bonus that would have been less than what I would have gotten if I had stuck around in my former role.

I was stressed out during those first couple months of the quarter when I knew my performance was being highly scrutinized for bonus planning. I even wrote an entire post in which I questioned my wisdom in changing roles in the fourth quarter. I had feelings of regret, and I experienced a great deal of stress ramping up in my new, highly complex role as quickly as possible. I had a lot of doubt about my decision, my ability to ramp, and ultimately, my bonus and its impact on  my financial challenge. It caused me considerable anxiety.

It looks like I did enough. The extra hours, the extra effort–all worth it.

(I also got a small raise.)

This is not goodbye–I’ll definitely write up the Month 7 Progress Report at the end of the month, and I plan on writing another post shortly after that to capture my thoughts and feelings of the overall experience. And, as promised, I’ll sporadically write follow-up posts.

Note: I’m not disclosing the bonus amount because it’s considered highly confidential by my employer and I’ll be so cash-poor at the end of this adventure that I can’t risk termination should HR  find out about this blog and see the bonus disclosure. I will include it in my salary figure in my progress report at the end of the month, but the salary figure will also include three paychecks, one with the raise in it, so it’ll be impossible to exactly identify the bonus amount.

Day 196 | $67,506 paid | $23,211 till freedom

My good buddy from grad school–my former partner-in-crime–is in town for the week. Craig’s the Entertainment Director at one of the major phone companies (e.g., Verizon, AT&T, Sprint, etc.), and he’s in town to make sure the SxSW event he planned goes off without a hitch. 

He invited me to hit up SxSW with him–first to the Bravo tent where he had a connection, then to the event he was putting on for work. We haven’t seen each other in a couple of years, and it was great to catch up. It was an awesome night of reminiscing, talking about future plans, and drinking for free.

We talked a lot about the student loans, and like me, he graduated with $100k, but he’s gotten it down to only $90k so far. He’s paying about $700/month and will be doing so for the next 12 or 13 years since he got a 15-year note. He didn’t know about my little challenge–we’ve done a horrible job of keeping in touch–but when I told him, he was completely shocked that I was able to make so much headway on it in such little time. His shock then turned to inspiration after I explained to him how I did it. He’d been trying to save up around $100k and potentially start his own business, but now he’s thinking about paying down his debt first so he can avoid the interest.

Interesting sidebar: Pedi-cab drivers were out in droves last night, and whom did I run into? Joel, the guy who trained me to be a pedi-cab driver!  I was walking down the street and I recognized his distinct whistle from the training over six months ago during that one night back in September. I flagged him down to say hey, and it took him a moment to recognize me. Once he figured it out, he tried to get me to pedi-cab during the upcoming week for SxSW, saying I could make around $700 a day. I declined–I was still seeing a lot of empty pedi-cabs last night, and I don’t even have a bike.

Residuals: Landscaping Customer
I got an interesting note in my inbox today:

Gentlemen,
You were recommended by a neighbor of mine. I would like to discuss a landscape project and hopefully receive a quote. What do you need from me?
ABC

Now, typically, Michael and I would have been ecstatic to have received an email like this, and we would have quickly dashed off a note to get this guy’s on-site consultation on the  calendar as soon as possible so we could quote him, book him, and execute the job.

Instead, my email went a little something like this:

Hi ABC,
Thanks for your interest. I’m afraid we’re exploring other avenues at this time and are not currently providing landscaping services. Should we resume operations, we will reach out to you immediately. Best of luck.
Thank you,
 XYZ

We’re no longer in the business of giving free consulting advice, which is what our business had come down to during its last few days. The unfortunate part of this is that this guy might have been the real deal, but we’ll never know.

Loose Ends
On Friday and Saturday, I took the time to edit past blog posts and add a progress tracker to every post. You can see it at the beginning of this post: It’s in gray-color font and calls out–at the date of the post–how many days of the challenge have elapsed (e.g., Day #196) and the debt remaining “till freedom.” My hope is that it will give folks who are new to this blog  and read some of the earlier posts a better sense of where I was at any one point in time. So the header tracker is real-time and the trackers in each post are historical.  

I also took the opportunity to re-read a few posts, and I wanted to take a moment to clarify I couple of things.

1. I reported that Fadi was selling the motorcycle he bought from me because of the starter issue. He actually ended up buying a different brand battery and that has appeared to do the trick. He now tells me how much he loves the bike every time he sees me.
2. At first I said I was going to pass on Luke and Faith’s wedding, then after going to Natalie and Navneet’s wedding and being so moved, I said I wouldn’t miss Luke and Faith’s wedding for the world. Well, I didn’t update the blog when it happened, but I actually RSVP’ed in the negative to the formal invitation when it came in the mail a month or so ago. The emotion I was feeling from Navneet and Natalie’s wedding that made me want to go to Luke and Faith’s wedding had worn off by the time I got their invitation in the mail. For the sake of my financial goal, I guess I’m glad there was a cooling-off period. So the words I said I would have to eat from the post where I lashed out at folks for telling me to go to the wedding and see my family for Christmas will not have to be eaten after all.

Sam Is Here
Sam got here yesterday! He’s completely moved in and set up. He walked into the kitchen with his phone held out in front of him while I was making my meals for the week. He was video-chatting with his girlfriend and he introduced me to her, then he walked around the house showing her his new digs. After the call, he brought me his phone and showed me a message he had typed to me: “Nice house. I really love it!” That comment brought a smile to my face. Sam had sent me $910 in the mail in February without even seeing the house or meeting me, so I’m glad it’s met his expectations.

Having Sam here has showcased a really helpful side of Patrick. Sam doesn’t have a car, but Patrick has been extremely helpful by driving him around. Last night, he took Sam to get sheets for his bed and other odds and ends, and today, he took him grocery-shopping. Patrick knew when he recommended that Sam live here that he didn’t have wheels and that Patrick would need to chauffeur him around, but he still made the suggestion for me to take Sam. I think Patrick is happy that he has somebody around that he can communicate with.

So we’re back to a full house, but of course, the volume level has stayed about the same–which is to say, pretty darn quiet. And the guy who can hear is the minority in the household! I’d be lying if I said it didn’t feel a little awkward this morning when we were all in the kitchen together fixing our breakfasts and they were signing to each other. I had no idea what was going on and sort of felt like an outsider. In fact, I probably felt how they feel every day when they’re out and about in the hearing world.

Man, I really need to take some ASL classes!

More DIY
I wrote in Keeping Up Appearances that I’d have to buy some blinds for the living room after paying off my student debt because the  current blinds were sagging in the middle due to broken support rod. I finally got sick of seeing the sag every day, so I got my ladder out and investigated to see if there was anything I could do about the problem in the interim.

The support rod was actually two pieces of wood joined together by a finger joint, and the finger joint had become unglued. I unscrewed the two wing nuts holding the blinds up and took them into the garage for an operation. I broke a fresh paint-stirring stick in half that I had gotten for free at Lowes awhile ago, put a piece on each side of the rod positioned both pieces over the break, and attached the whole combo with three zip-ties. Voila! A splint for my blinds. And no more sag.

And this isn’t just a stop-gap measure, either. The valence obscures the repair job and makes it completely invisible. So that’s a fifty-dollar expense that I’ll completely avoid–now and after NMHD.

Bonus Decision This Week
This week is kind of a big deal: my boss tells me what I’ll be getting in terms of a bonus in my paycheck at the end of the month. I last mentioned the bonus in the Month 6 Progress Report and said that it could make or break my entire challenge. If it’s $8k after-tax, I’m golden and on track to meet my goal. If it’s significantly lower, it might be time to start looking for extra work–I might have to take Joel up on his offer, after all.

Drum roll, please! I find out on Wednesday.