In May 2007, I graduated from Darden Business School and moved to New York City. I didn’t have a firm job offer and I had run out of money. In June, I got a full-time job offer and to tide myself over until I got my first paycheck in July I had to take a cash advance on my American Express card at an ATM and only making the minimum credit card payment that month. This was incredibly upsetting to me because I have always prided myself on never carrying any credit card debt. Though I could see the light at the end of the tunnel, I felt that financially I had hit rock bottom. I remember standing at that ATM machine in Astoria, Queens, where I was subletting an apartment month-to-month from a friend. I must have stood there for 20 minutes before making the cash withdrawal. I felt afraid, alone, and very, very broke.
Pulling myself together
I had gotten some gift certificate money on Amazon.com and with it bought Suze Orman’s just-published book Young, Fabulous, and Broke. I tore through it in an effort to put together a plan of how to get myself back on track. In addition to having run out of money, I also had over $100,000 of school loans hanging over me. It felt like a crushing amount of debt. It was a crushing amount of debt, particularly for someone starting at $0. To make matters worse, the interest on the loans was not tax-deductible because my income was too high – no consideration for debt-to-income ratio is given by the IRS with regards to this tax rule. That rule motivated me to get rid of these loans as quickly as possible. I didn’t regret my education, though I definitely felt like I would be in debt for many years to come and have to delay a lot of my dreams, which were precisely the reasons I went to graduate school in the first place.
After a mini-breakdown at the ATM, I pulled myself together, talked to some friends about this situation, and eventually toughened up. To be honest, I made the choice to go to school, take these loans, move to New York City, and try to make a go of a career as a product developer. I had to take responsibility for this debt; I had to own it and get it paid down as fast as I could without missing out on the fun of life in the meantime. A delicate balance. I was on the road, and I just had to chin up and keep going. Feeling sorry for myself just made the situation worse so I stopped whining, poured my heart into a solid plan to put away an emergency fund (which turned out to be very important considering that the recession would hit full force 6 months later), pay down my loans, and still enjoy all of the amazing experience that New York City has to offer. That last piece was key – if I couldn’t find a way to enjoy NYC while managing my finances, what would be the point in living here?
A plan is formed
With help from Suze’s book and my own experience of never really having much money to begin with, I put a plan in place. I had a goal amount to save every month that would first be put away for my emergency fund (the amount it would take me to live for 12 months if I lose my job.) I would make the minimum payments on my school loans until my emergency fund was in place, and then use the monthly savings amount to pay down the loans. Little by little I squirreled away money while still enjoying New York City in an affordable way. I’ve never been a shopper or much of a collector so resisting the endless temptations in New York City to buy-buy-buy was easy for me – and it was key to paying down my debt. My personal yoga practice helped A LOT, as did running, taking long walks in the park, and seeing my friends as often as possible. I had a lot of anxiety about the loans and when I felt it overwhelming me, I would get out into the world to shake it off.
A huge goal realized in 3 and a half years
Friday, February 11th, was a big, beautiful day. A little over three and a half years since putting my plan into action, I paid off over half of my student loans – the entirety of the private loans I took to go to graduate school. I still have government loans from both my undergraduate (which I also paid for myself) and graduate studies, though they have a locked interest rate. I will be turning my attention toward them next, though for today I’m doing a little jig of celebration. I threw off a great big heavy chain of debt today and it feels amazing!
My book about yoga and personal finance
I’m using this experience as a basis for a book I’m working on that combines the principles of yoga and solid guidelines for developing your own personal financial plan. I want this story of debt relief to be useful to as many people as possible, and the best way to make that happen is to tell the story.
Have you accomplished a big fat goal recently or have you put a plan in place to pay down your debt despite the tough economy? Let me know your story!
This blog is also available as a podcast on Cinch and iTunes.
Christa Avampato 