My wife and I got married on Aug 27, 2011. It was one of the happiest days of my life.
But also one of the lowest points - financially. Madly in love, we decided to get married just
a few months after we graduated from our respective universities. I just finished my MBA. My wife
had recently completed Nursing school. Combined we had a total of $105,000 in student loan.
$87,000 of that being mine. In addition, we decided to have an epic wedding - that was
pretty popular back then apparently - and spent pretty much every penny we had. We were
not only broke - we were starting our marriage with this huge weight on our shoulder. Fast
forward a few years, after 3.5 years, we were able to declare ourselves debt free. We successfully
paid off all $105,000 of debt. And we were able to do this while having two kids, Cohabitating
with my aging parents and successfully growing our respective careers. So how were we able
to do this? Hi, if you are new to the channel, my name is Tae from Financial Tortoise - a
channel dedicated to creating Personal Finance content for the Sandwich Generation. In this
video, I want to share the steps that my wife and I took to pay off our $105,000 of student
loan debt and break down some of the important details I hope you would find helpful to your
own debt pay down journey. Number One, We Organized Our Finances When
we have financial issues, we usually feel it in our gut first We either have debt that
we've been neglecting or have spending habit that we don't want to confront However, unless
we are willing to face our problems and see it for what it is, we can't begin to fix it.
Peter Drucker, the management consultant had a saying “What gets measured gets managed”
Essentially unless we can measure our current situation, we can't begin to manage it. We
can't begin to work on the problem. After the wedding, I knew I wasn't doing well financially.
I had a pile of student loan documents sitting on my desk. I had a bunch of wedding bills
I was still paying off. And all my savings had been depleted. I knew I wasn't at a good
place. But I didn't want to face the truth. It would be too painful to see the actual
numbers. But I also knew this was what I had to start with if I really wanted to start
the process of paying down my debt. I went through all my files and organized how much
I had in my bank account, how much student loans both my wife and I owed and how much
I could apply to paying down the debt each month. You can use a simple spreadsheet or
online platforms like mint or personal capital. But you want to organize all your finances
first so you can get a holistic view of the problem you'll be tackling.
Number Two, We Invested In Our Financial Education What really got the fire inside my wife and
I to start our debt pay down journey was attending a Dave Ramsey Conference. It was my first
personal finance conference and it hit me like a freight train. A statement that really
resonated with me was "Debt is Not a Tool. The Borrower is Slave to the Lender". It went
against everything I learned about money up to that point. I was conditioned to believe
that some debts were actually good. Student loans are good because you are investing in
yourself and it increases your earning potential down the line. But when I was honest to myself,
I took out a student loan because it was convenient. If I was serious about my personal finances,
I could have figured out ways to get my MBA at a much cheaper cost - lower my cost of
housing by having roommates, packing my lunch instead of going out with my classmates and
calling it "networking." Pursuing jobs at companies that sponsored education as part
of their hiring practice. After the conference, I couldn't get enough personal finance education.
I bought the DVD set and devoured it - forcing my wife to watch it with me during dinner.
I got my hands on all the personal books I could find. You can find a link to a video
about my favorite personal book here. I listened to personal finance podcasts and consumed
personal finance youtube videos. I was catching up on years of personal finance education
I missed. I never wanted to be in this vulnerable position again and I knew financial literacy
was key. Number Three, We Cut Back Our Expenses This
is the real key step. Many people get stuck here, especially if you are not used to cutting
back. The sexy topics around personal finance are usually investing or real estate. You'd
be hard pressed to find someone excited about cutting back. It feels so stifling and depressing.
However, if you are serious about paying down debt and making progress financially, you
can't skip this step. You need to learn to manage your expenses and not let it manage
you. I know many people who have very good salaries - $200, $300, even $400 thousand
dollars a year and still have their student debt years after they've graduated school.
If you are in a certain professional career, you might feel you need to live a certain
elevated lifestyle. And you might even come to believe that you actually deserve that
lifestyle because you work so hard. However, what you actually deserve is to be debt free.
MBAs usually lead to good salaries at respectable companies. Many of my friends from my business
school, myself included, were privileged to be in this position. However, instead of flashing
our new salaries by purchasing new cars and renting nice downtown apartments, my wife
and I decided to go the other way. No more 'networking' lunch outings. I packed my lunch
and brewed my own coffee. No more car upgrades. While my classmates were showing off their
brand new luxury cars they bought with their investment banking bonus I continued to drive
our reliable 2008 Honda Civic to work. We were very very careful about lifestyle inflation.
Usually after a couple gets married, you feel you need new furniture, new utensils, new
toys to fill your love nest. We brought over all our bachelor pad furniture and vowed to
not buy any new piece of furniture until all our debt was paid off.
Number Four, We Implemented Dave Ramsey's Debt Snowball Method The basic premise behind
this method is that we are more emotional beings than logical beings when it comes to
making financial decisions. If we were completely logical, it would make sense to pay off our
highest interest loan first then pay off debt with the next high interest rate. However,
we aren't logical beings. If we were logical and rational individuals, we wouldn't have
student loans in the first place. So what Dave Ramsey proposes here is to actually pay
off our debt from the smallest to largest. This allows us to get quick wins and motivates
us to keep going with our plan. Paying down debt is a marathon not a sprint. So you need
all the motivation you can get to keep going. On a spreadsheet, I listed out all our student
loans from smallest to largest ignoring interest rate. While still paying the minimum for all
other student loans, we would tackle the smallest one with all available extra money we had
until it was paid off. Once it was paid off, I would leave it on my spreadsheet but just
strike it out. Then we would tackle the next one. Because there was one less minimum payment,
we could apply more to the next loan. Essentially we kept "snowballing" our payments until we
were tackling the last and the largest loan with all available money we had. By the time
I got to my last loan, I remember I was so laser focused and motivated to pay it off,
I would scrummage through our car and any hidden crevice around the house to find loose
change I could apply against this loan. Number Five | We Grew Our Careers and Our
Income So this is the other half of basic personal finance 101 There is a limit to how
much you can cut, but there's no limit to how much you can make. If you really want
to speed things up in your debt pay down journey, you need to make more money. This is where
the benefit of a multigenerational family really kicked in for us Most often when couples
are thinking about children, they also need to think about how to handle the logistics
that comes with having a child Do one parent stay home with the child before he or she
is old enough for school? Do you find a local daycare? Can you afford to hire a nanny? For
us, because we decided to cohabitate with my parents, my mom was able to thankfully
fill that role. We did pay her, but the biggest factor in this arrangement was that we trusted
her to take care of her grandchildren Feeling secure that someone was watching our baby
when we left for work, both my wife and I were able to continually dedicate ourselves
to our careers and really grow it We could take on travel assignment that might take
us out of town for few days We could take on hard duties that kept us later at work
We were so focused on paying down our debt, we were willing to make the sacrifice now
so we could enjoy debt freedom as soon as possible We were also willing to make these
sacrifices now so we wouldn’t have to make it later when the kids were older Whether
you have a normal 9-5 job like us or have your own business, if you want to pay down
your debt as soon as possible, think of ways where you can increase your income either
by pursuing that new promotion or taking on additional clients. It is going to be hard,
but Dave Ramsey has a saying “If you will live like no one else, later you can live
like no one else.” - Dave Ramsey Make sacrifice today so you don't have to make the sacrifice
tomorrow Number Six | We Remained Committed To The
Vision Debt paydown is a long journey Unless you have very high income and are able to
cut your expenses down drastically overnight, it's going to take you years. I've seen people
who were able to do it within 2-3 years. But others who took many more years. Everyone's
pathway is different so don't compare yourself to others. What matters is your pathway. And
even once you lay out your plan, you are going to have distractions. Things that might throw
you off the rail. For us this was having kids. A year into our debt paydown journey, my wife
was pregnant with our first child. This could have completely thrown us off our initial
goal of paying down our student loan as soon as possible. Having a child is a very emotional
process and as first time parents, you are terrified of making mistakes. One way we overcompensate
this insecurity is by buying all the best and greatest gears for your baby. The best
stroller. The best crib. The best car seat. I admit, I did go down this dark pathway with
several of our items. Once you start down the car seat shopping route, don't be surprised
if you come out the other end with a baby car seat suitable for F-22 Jet Pilots It's
easy to get discouraged and throw in the towel moment you are distracted or make one mistake
in your debt paydown journey. But be patient. Anticipate that you will make mistakes and
things won’t go the way you initially planned. We had a saying in the military “No plan
survives first contact.” – Random Army General Very rarely does a plan work out exactly
as initially intended. Life happens and the key to success is how we handle those unexpected
events while keeping the long term goal in perspective. Stay committed to the vision
Few ways that can help you do this is to curate your information feed One of the big reasons
why I went down the baby gear shopping back hole was because I was allowing myself to
be influenced by other parents on social media and their new shiny strollers or car seats
Instead, of allowing yourself to be influenced by what other people are buying these days,
allow yourself to be influenced by people and feeds that supports your goals Personal
finance books, Personal finance youtubes, podcasts And outside social media, try to
find other people who are pursuing the same journey as you. If you have people around
you that don't support your vision, don't feel bad about distancing yourself from them
for now. You have a vision and a goal you are trying to achieve, and you need to prioritize
that Number Seven | Don't Underestimate What You
Can Achieve Humans tend to overestimate what we can accomplish in the short-term but underestimate
what we can accomplish in the long-run. When my wife and I look back at our debt pay down
journey, we are in awe of what we were able to do. If someone told us at the beginning
of our journey we would have paid off $105,000 of student loans in 3.5 years, we would have
laughed, very nervously. But by focusing on the day to day progress and our ultimate goal,
we stuck through it We were a tortoise that just kept moving despite how slow our progress
was. I’ll never forget the day I made that last payment and said goodbye to student loans
forever. I believe you will one day reach that day as well. I'm rooting for you. Thank
you guys for watching. If you found value from this video, please hit the like button,
leave a comment and subscribe to the channel so that you don't miss out on any of my other
upcoming videos. I firmly believe that being part of the Sandwich Generation doesn't have
to mean financial stress. With careful planning and preparation, we can thrive during this
stage of life. Help me spread the knowledge. Thank you again and I'll see you in my next
video.