In Debt, For Beginners, Money

How I got out of $60,000 of debt in 18 months by the age of 25

I am still getting questions about how I got out of $60,000 debt at the age of 25 in only 18 months (a year and a half), so here it is.

1. I MADE A GOOD SALARY IMMEDIATELY

Low income = More struggling.

The higher income you make, the faster you can get out of debt. This is an immutable fact.

You cannot make a tragic salary and expect to achieve the same results as someone who makes double or triple what you do.

2. I NEGOTIATED A HIGHER SALARY RIGHT OUT OF SCHOOL

I started at a gross salary of $65,000.

I negotiated from $50,000 to $65,000 because you never accept the first offer, no matter how grateful you are.

If they offered you the job, it means they want you.

You can always try, and if they say “No” what’s the worst thing you can do?

Accept the original offer? Sounds like a win-win to me.


Also, I knew that my first salary would matter for bonuses and even retirement contributions.

A 5% bonus for instance, on $50,000 is $2500.

A 5% bonus on $65,000 is $3250.

If I just accepted the first offer out of school, I’d be out $750 in my pocket, and any promotions would be based on my base salary, which just increase the gap between myself and other starting offers as years go by.

(Many of my classmates accepted the first offer out of school without even trying to negotiate.)

3. I GOT ANGRY AT MYSELF & MY STUDENT DEBT

I sat up, paid attention to my debt and said to myself: This 10-year plan of paying off my $60,000 student loans is not going to fly with me.

I am not interested in being a working slave to my debt for 3650 days.

I basically got angry with it, and made it my focus to be eliminated, ASAP.

It was rocky in the start.

I was not used to budgeting or tracking my expenses, and I definitely spent unnecessarily at the start because I felt entitled to spend that money (“I worked for it!”… “I deserve it!”).

As time went on, I became better and better at it, because I saw the debt disappearing and my goal appearing to become a reality.

I was also really annoyed that I was paying something like $5 in student loan interest a day. $5!!!!!!

I was so angry at that $5 interest charge, that I started sending PENNIES left over in my budget towards my debt after I had allocated my money towards the things I needed to pay for.

4. I HAD A GREAT JOB THAT ALLOWED ME TO SAVE ON LIVING EXPENSES

I was a consultant who lived out of a suitcase. I gave up my apartment, sold and stored my furniture and things, and basically “lived” where the project was, with the permission of my manager who loved the idea.

I basically had no basic living expenses as a result — the hotel (including utilities), and the food was totally paid for.

The sacrifice was that I didn’t go back to see my friends or family for 18 months. I basically dropped off the face of the Earth, missed a lot of parties, bonding, and hanging out with them.

All I did was go to work, come back to the hotel, watch TV, start my first personal finance blog chronicling all of this (which I sold in 2012), and repeat it for 18 months.

5. I TOOK A RISK & QUIT AFTER A YEAR TO FREELANCE

Just by chance, the job market was fantastic, and I was encouraged to quit and take the risk to become a freelancer.

So I did.

I had enough experience under my belt to quit (it was insane), and took the leap at the age of 25 and became what people tell me, is the youngest freelancer they have seen in the business.

I don’t know if that’s true but I know it is certainly unusual, as I don’t know anyone else who has done the same thing that I did.

This now works both for and against me in my career; some think I am too young to know anything, which makes me have to work harder to prove myself than if I were older.

I took a big risk because I only had $2000 saved in cash in the bank, not including my retirement funds which I couldn’t touch anyway, and about $18,000 left to go in debt repayment.

I was freaking out when I quit, but I thought carefully about it, and asked myself: What did I have to lose? I would just join another company if I couldn’t make it.

I could have definitely stayed and steadily paid off my debt, plodding along the way I was doing for the past year. I was on track to clear my debt within a year or so.

Out of sheer luck, I landed a contract 2 days after I quit, and in 3 months, cleared my entire remaining debt in one fell swoop, while banking about $30,000 in the process (net after taxes).

That decision was the best, and the riskiest one I ever made.

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As you can see, it’s a situation that I can’t really sell as a formula to replicate, but the lessons I learned throughout it all still apply to anyone in any kind of debt.

10 LESSONS I LEARNED WHILE GETTING OUT OF DEBT

  1. Make it your focus to get out of debt. Period. No other extenuating circumstances should prevail.
  2. Make as much income as you can, which includes asking for more money and switching jobs.
  3. Spend as little as you can, in any way you can, while still allowing for mistakes.
  4. Budget and track your expenses so that you know where your weaknesses are.
  5. Take calculated risks and think through your plan of action all the way to the bitter end.
  6. Don’t give up; debt fatigue will set in but you have to find a way to power through it and stay motivated.
  7. Don’t stop learning about your money and plateau — you do not know everything — this includes INVESTING!
  8. Don’t listen to what naysayers will tell you — “That’s impossible!”…”You will always be in debt!”.
  9. Don’t buy what you can’t afford in the first place — this includes houses, cars and student loans that lead to dead end jobs.
  10. Take a break and avoid comparing yourselves to others if you can — you can only compare yourself to who you were yesterday.

That’s it. That’s how I got out of debt.

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Sherry of Save. Spend. Splurge.

Millionaire at 36 after getting out of $60K of student debt in 18 months, a little over a decade earlier, using TheBudgetingTool.com. Since then, I have paid my $600K home in cash (my half was $300K), my $180K casr in cash, worked 50% of my career (taking 1-2 year breaks), and quadrupled my income within 2 years of graduating, going from $65K to $260K with an average lifetime savings rate of 50%. I could retire today if I wanted, but love my work-life balance as a freelancing consultant in STEM (Science, Technology, Engineering, Math). I am all about balance - between time and money, and also enjoying my money. I also post daily on Instagram @saverspender.

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6 Comments

  1. Christian @firefoxii.com

    Great story, and thumps up for getting out of debt so fast. Regards Christian

    Reply
  2. Jessie's Money

    This is absolutely how to get it done!

    Reply
  3. Sylvia @ Professional Girl

    These are great tips! I wish I was serious about my debt when I started my first job and I wish I had negotiated a higher salary. I’ve definitely learned from my mistakes.

    Reply
    1. save. spend. splurge.

      Never too late to negotiate.

      Reply

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