I have always been a saver. My parents would even tell you that as a child I would immediately put any money that I earned or received in the bank and not spend it. I grew up in a family with parents who worked hard to not just make ends meet but to make sure we had a comfortable life. I think I knew pretty early on that money was important.
After graduating from college in 2003 with a Bachelor’s Degree in Occupational Therapy I had just under $20,000 in student loan debt. If I knew then what I know now I would have paid off that loan as quickly as possible to avoid paying interest. Instead, I took my time. I did pay more than the minimum and even though I was not in a hurry to pay it off, I did so in a few years.
In 2009 I met my husband, Jason. He had recently graduated with his Doctorate in Physical Therapy. His total student loan debt upon graduating for both undergrad and graduate school was $145,000. Yes, you read that right, it was not a typo. His monthly student loan payment was roughly $2000/month.
When you are in that much student loan debt it seems like there is no end in sight. For the first few years, Jason put extra (as much as possible) towards this debt but chipping away at a loan of this size is daunting.
I was appalled to hear about how much student loan debt he was in. I think I got on his case from the very beginning to pay his loan off as quickly as possible to avoid the interest that was piling on. At that time the average student loan interest rate was about 6.5%. With a $145,000 loan the daily interest accrued would be $26, which is $780/month just in interest.
If you are interested in learning how student loan interest rates work and to access a very handy student loan interest rate calculator, check out this article by Nerdwallet HERE.
In 2015 Jason and I purchased our first house. It was around this time that we started to become more interested in personal finance. I was definitely hesitant to purchase a house because the thought of taking out a mortgage seemed kind of scary.
At that time, Jason also still had his student loans looming over our heads. When we bought our house we made the goal of paying off our mortgage and to finish paying off Jason’s student loans in 2 years. With a lot of hard work, a little sacrifice, and a lot of determination, we did it.
Despite student loan and mortgage debt, Jason and I have always lived pretty modest lives. We have done our fair share of traveling and have never really deprived ourselves of anything that we’ve really wanted but we try to make smart choices and research before making purchases.
We have always used credit cards but make sure to pay them off in full, carrying a zero balance. We don’t buy new cars and even joke that we usually drive the worst cars in the parking lot at work. We love going out to restaurants but we love to cook even more, so we spend most nights eating in, which keeps our entertainment expenses low.
We don’t make any purchases unless we can essentially pay for it in cash. There are a lot of little things that we do that are just a part of our lifestyle that have helped us to save money over the years and to work towards paying off our debts.
Since paying off our mortgage and Jason’s student loans in 2017 we can finally say that we are truly debt free. And it’s a great feeling. Some people may question our choice to pay off our mortgage so quickly instead of using that money to invest. We understand where they are coming from and we talked about these two scenarios before deciding to pay off our house. We are happy to report that we are positive that we made the right decision for us. There is something to be said for owning your home and being completely debt free.
For us, living a life that is debt free is not just about having a life without payments rather it’s more about having opportunity and freedom.
You become free from the feeling of being chained to work to make money and then having to turn around and give that paycheck away. You are handed the opportunity to travel or spend your money in anyway you deem fit for you, without guilt or worry.
It is perhaps inevitable that you will (or currently have) some sort of debt to tackle, whether it be credit cards, mortgage, student loans, or car payments. I think it’s important to be knowledgeable about what you are getting into. Doing the calculations to see how much interest you are paying may be the one thing that you need to motivate you to pay your loan off sooner.
Another factor that people tend not to do as often as they should is living within or below their means. Jason and I could have bought a bigger, fancier house but we made the conscious decision not to. And in doing so, we were able to own our home, free and clear, after two years.
Living life debt free has given us the peace of mind that comes with financial freedom. Ridding our lives of debt and monetary burden was the best start to our quest to become financially independent.