Category: loans

determination, education, loans, money

Beginning: How I Got My Financial Life on Track and Paid Off My Private Student Loans

Christa Avampato

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.

business, career, economy, finance, financing, investing, job, loans, personal finance, politics

Worried about the economy? Here are some quick answers to common questions

Christa Avampato

I was going to post about myself, my life, and my observations about the world around me today. However, I’m hearing so many people say that they don’t understand how this current economic crisis is going to hit them personally, that I wanted to do my part to try to get the word out about 4 common questions that many people have asked me over the past few weeks:


1.) “Do I need to pull my money out of my savings and checking accounts and put it in my mattress?”

No. Please don’t do that. If it gets stolen or you have some disaster like a house fire, you’ll lose it all. Also, as long as your money is in a bank that is FDIC-insured, your money is safe up to $100,000. If you have more than $100,000 with the same bank, then take out the balance above $100,000 and move it to an entirely different bank, not just into another account at the same bank. The $100,000 insurance is per depositor, not per account! Don’t know if your bank is FDIC-insured? Call them, stop into a branch, or visit their website.

2.) “I think I am going to stop investing in my retirement fund because the market is so bad. Is that a good idea.”

No. No, no, no, no! Please don’t do this. Please. Economies go in cycles. You need the compounding on your retirement savings to make retirement plans work. If you pull out your money or stop investing, you will lose the compounding factor you need. And you’ll pay hefty penalties on the withdrawal plus lock in the loss. What you can and absolutely need to do is make sure that your portfolio is balanced. Many retirement plans have a “set it and forget” plan. That’s what I have. You plug in the number of years you have until retirement, and the plan automatically calibrates different investments to get you to your retirement goals. Still unsure? Make an appointment with an advisor at the institution that manages your retirement accounts – it’s free and it’s their job to explain your options to you. And if you don’t know how to make an appointment with them, contact your HR department. 

3.) “This job market is so crazy that I’ve decided to get out of the job market. Is that a good idea?” 

AH!!!!!!!!!! No – no no no. Don’t do that. If you retire now, you essentially lock in all the loses your retirement fund has just been hit with because you begin to draw on those funds yo worked so hard to save. This is bad – really, really bad. You worked hard all these years, and you’re not getting the full benefit of that hard work. If you’re quitting your job with nothing else to go to, you need to reconsider immediately. And change your mind – do no leave your job without another place to go. There will likely be nothing for you to go to. Now, I do think you should be networking and watching out for new employment opportunities that sound interesting. Actually, I think you should ALWAYS do this, even if you are 100% in love with your job. You need to cover your bases and in this day and age, getting a job interview (and probably getting your dream job or even just your next job) has much more to do with who you know rather than what you know.   

4.) “I don’t think Wall Street zillionaires should get a bailout so I’m against the Government’s $700 billion plan.”

I don’t blame you for being confused on the bailout – I blame politicians who don’t understand economics (inexcusable) and make this a partisan issue (also inexcusable). This is not about bailing out Wall Street. I’m really upset with the person who coined this plan as a “bailout” – it’s not. This money will make the Federal Government a bank that will loan money to banks like Citi or Bank of America to make it easier for those banks to responsibly loan money to average consumers (you and me). There will be plenty of Government oversight to make sure that money is loaned responsibly. And when the market recovers, those banks will pay back the Government, who will pay back the tax payers.   

If we don’t have this plan, here’s what will happen:
Access to credit will plummet, making it hard for all Americans and all American businesses to have any access to credit. All free markets need access to credit to function properly. This los of access to credit is not good – you won’t be able to get car loans, schools loans, mortgages, or any other kind of consumer loan. Credit card companies will cut your limit. All businesses, whether it’s your local pizzeria or GE, will not be able to get the loans, short-term and long-term, big and small, that they have to have to do business and to get us the goods and services we need to survive. Bankruptcies and home foreclosures will skyrocket, and as a result, unemployment will also skyrocket. We’ll be in a downward spiral.

So here’s the choice: a) pay some more taxes now and get that money back in the fairly near-future so our economy can get going again. b) pay a whole lot more now with people losing their homes and companies going out of business, causing unemployment to rise rapidly, and pay even more later as we struggle to deal with the fall out. And we will ALL deal with the fall-out, especially those in lower and middle income brackets. The recovery from option b) will be slow and painful. a) will be less painful and shorter. I’m going with a). I don’t like that we’re in this situation, but here we are.

This might be the only idea that George Bush and I will agree on, and I took some convincing. I read A LOT about this, talked and listened to a lot of people very knowledgeable in finance. At this late date, the horse is out of the economic barn and the only way to corral him back inside and under control is through a rescue plan. There simply is no other better option.