Today marks a very special day in our journey towards financial independence. Today is the day we submit our very last payment to finally become debt free. DEBT FREE!
It’s hard to type those words without getting a little emotional because it’s something that has weighed heavily on our minds since the summer of 2014, the summer I graduated from dental school.
How it all started
I still remember the feelings that rushed through me as I sat in a small office across from a nicely dressed businessman. He had the difficult task of explaining to 80 new and extremely excited dentists that their 4 years worth of delayed gratification had come with a hefty price tag and payment was soon coming due.
I remember feeling as he turned the computer screen my way to show how much I now owed. It felt like I had just been kicked in the stomach by a Clydesdale horse. Then, he proceeded to show how much I would pay by the time the loan was paid off, in full, in 30 years. The stomach punch feeling quickly turned into an uppercut to the genitals feeling. I started to sweat profusely as I thought about having to explain this mess to my wife.
Interest: Friend or Foe?
A $250,000 loan will be paid off in 30 years at $1,342 paid per month. The total paid by the end of those 30 years at 5% interest will be $483,1349. Yes, that’s correct, almost double the initial amount. This was absolutely ridiculous in my mind. There was no mention of this when we began our educational journey. Yeah, we knew we would have to pay this money back at some point, but whenever we asked someone about it the answer was always very similar. “Oh, don’t worry about it. You’ll be making good money.” or “Yeah, but that’s good debt”. When pressed with the question each and every valued source skirted the reality of the situation. Which was, school is expensive and it might not actually be worth it in the end. Debt is not easy to pay off and usually your salary does not make up for the high cost of schooling.
But, here I was with a pit in my stomach the size of the grand canyon and a whole lot of debt now on my shoulders to carry with me. So, my wife and I did the only thing we knew would work at that time. We put our heads down and we attacked that loan with all our might.
Here are the 10 things we did to pay off our $250,000 loan in 18 months:
1. Go back to school.
Now you might say “wait a minute. You just complained about how expensive school was and how hard it is to pay off, and you went back for more?” We realized that becoming a specialist in dentistry could significantly boost our income. A small sacrifice for a big reward in the long run. Also, we have found that an important aspect of happiness and contentment is through continual learning.
2. Everybody contributes.
Never discount any extra income as you start down the path of paying down loans. There were days my wife would be up all night with a 6-week old baby and right back up at 7 am to work on spreadsheets and debits and credits from home.
3. Cut out extra spending.
The latest gadgets and fancy clothes were an afterthought when you see how much those things cost after 30 years of interest is accrued on top of your $100 pair of shoes. Wear and repair became the mantra.
4. Learn about debt.
Instead of pulling the covers over our heads and wishing the nightmare would end, we rented books from the library and listened to thousands of podcasts that talked about debt, saving and finance. A few of our favorite podcasts that helped along the way were… ChooseFi, The White Coat Investor, Bigger Pockets Money, The Minimalists, Mr. Money Mustache, Becoming Minimalist, The Mad Fientist
5. Ask for help.
We did not shy away from the usual awkward topic of money. We opened conversations with our friends asking what they do to optimize their finances. Most laughed but some gave some real nuggets of wisdom.
6. Cut out monthly services.
We said goodbye to our old family friend, Mr Netty Netflix. It was difficult but very necessary. The extra money was only part of the benefit. We now had 1-3 hours of extra time each night to optimize. Spotify premium and Audible.com also went bye bye.
7. Celebrate each and every win.
At the end of each payment, we would take a screenshot of the new loan amount and send it to one another. Lot’s and lot’s of fro-yo was consumed to celebrate our dwindling loan amount.
8. Tackle that SOB like it stole from you.
Money from Christmas’, birthday’s, and raises went to dinner and a small item, while the rest went straight to the loan. Sometimes it was only $50. But that $50 went towards something worth way more than it’s monetary value could purchase, it went towards our freedom.
9. Talk about debt like it’s a part of the family.
We talked about how it would feel to finally be debt free. We would imagine how and when we would pay that final dollar and who would hit the submit button. We imagined the feelings we would have when that day came. We even talked about what we would eat to celebrate our big milestone.
10. Enjoy the journey.
At the end of the day, we reminded ourselves that nobody forced us into this situation. Nobody tricked us into taking on this huge amount of debt. So, we tried to see this journey as something of a life optimization experiment, a rite of passage, if you will, into the world of financial independence. When things got a little too intense during a conversation about the loan we would look back at how far we’ve come and all that we’ve learned. Usually, a sense of gratitude would win us over and inevitably lighten the mood. We reminded ourselves that this was perfect training for our path to financial independence. If we could pay down 250K in 18 months, then why couldn’t we continue to do that until we reach our FI number. It gave us a clear path to the end of the rat race. It gave us confidence that it can be done, even with vacations and lots and lots of chipotle. We always assumed that the path to FI was about deprivation and uncomfortable sacrifices. What we learned was that the path to FI can actually help you live a more fulfilled life by deliberately choosing what to add and what to take away.
What we learned
Now that the loan is gone, we can finally breathe a little easier and look back at what we’ve learned. Our big takeaways is that we are in control, we are in control of every good and bad situation that befalls us. We can complain about the situations we are in, or we can see it as something we can learn from and overcome.
We learned to love the challenge because succeeding at the challenge of paying off our debt meant we most surely would succeed at any other obstacle that most surely will come our way.
