When I graduated from law school in the spring of 2012, I came out with more than just a degree. Between student loans and credit cards, I also had $112,000 of debt. Not exactly how I’d pictured starting my new career.
I got a job at a great firm in Washington, D.C. shortly after graduating. But as the six-month grace period on my student loans ticked away, my massive loan balance took up more and more space in the back of my mind. So I decided that come repayment time, I’d use the bulk of my $100,000 take-home salary to pay off all my debt within one year.
The good news is that after just a few months, I’d made huge progress. The downside? I was utterly miserable.
While most get-out-of-debt stories praise self-discipline and sacrifice, they rarely touch on the consequences of being too aggressive with debt repayment. (Yes, there is such a thing.) Here’s how that happened to me.
Feeling the Debt Pinch
When I set out on my goal in the winter of 2012 (just after my grace period was up), the thought of paying off that much debt in a year didn’t seem unrealistic. My student loans accounted for $90,000, while credit card bills made up the rest. Fortunately, I was earning enough to easily cover my rent and was already on track to max out my 401(k). After accounting for my basic living expenses like food, cell phone and utilities, I saw no reason why I couldn’t throw all my leftover paychecks at my debt.
My new apartment was unfurnished, but that could wait, right? The only red flag was that my plan would make it nearly impossible to build up my emergency fund if I focused solely on my debt. This made me a little nervous. But I’d never been in debt before and the balance was enough to make me shake off any hesitation.
Paying Off Over $100K of Debt In One Year
I started out super-enthusiastic about my plan. I set up automatic student loan payments for $2,500 a month, which was $1,000 more than my minimum payment. My three credit cards each had limited-time 0% interest, so I began making the largest monthly payments I could afford.
I skipped lifestyle upgrades I would have loved to have made. I bought clothes at bargain stores. I kept my 15-year-old car, which was fully paid off. The only major thing I purchased for my new home was a mattress. The rest of my one-bedroom apartment was left relatively bare, aside from some necessities I already had from law school.
I funneled even more cash toward my debt. I skipped coffee dates or eating out. I brown-bagged my lunch every day. And on days that I forgot to pack it, I didn't eat. Vacation plans, like a “bar trip” (something many law school grads do to celebrate passing the bar), were also put on hold. My sole focus became paying off my debt.
I’ll be the first to admit that I’d become obsessed. I was working around the clock, using every bit of extra income — including bonuses — to make extra payments toward my student loans. I also upped my credit card payments. There were some months where I paid upwards of $6,000 on my loans and 10 times the minimum payment on my credit cards. By the spring of 2013, my debt was down to about $60,000.
On the one hand, I was thrilled with what I’d accomplished. On the other, I was absolutely exhausted. I also had nothing in my savings account, something that was highlighted during a financial close call I had a few months into my payoff journey. I was just about to make a credit card payment when I realized that if I did, the rent check I had already sent off would bounce. I caught my math error in time, but because of my lack of savings — combined with my stupidly aggressive debt repayment plan — I didn’t have enough cash to cover both bills. I ended up paying my credit card late that month, which wasn’t the end of the world, but definitely not ideal.
It was a major moment of clarity for me. What would I do if faced with a real emergency?
I reevaluated the sacrifices I was making to achieve this monumental goal I’d set for myself. Was it worth it? After eight months, I decided to refocus.
How I Eased Up On My Debt Payments
In July 2013, I added six months to my original deadline. This meant scaling back on my debt payments and redirecting more money into my emergency fund. I continued paying at least $2,500 per month on my student loans, but I was no longer earmarking every dime for debt. I did, however, keep paying well beyond the minimum payments on my credit cards — the introductory 0% interest rates I had were winding down, and I wanted those balances paid off before that changed.
I finally granted myself permission to do things like go out to dinner with friends or see a movie. I also gave in to creature comforts, buying a couch off Craigslist.
By the time July 2014 rolled around, I was able to make my last debt payment — 18 months after I started. The fact that it took me over a year to do it didn’t make me feel any less proud of myself. Plus I had a few thousand dollars in my emergency fund when I hit the milestone.
The first thing I did after getting out of debt? I splurged on a $200 hand mixer for my kitchen. Since then, I’ve remained debt-free, building up my emergency fund to the equivalent of about nine months of expenses. I’ve also been able to invest some extra money in the stock market. These days, I definitely live a more comfortable lifestyle, with the big-picture goal of buying a house.
The biggest lesson I learned is that paying off debt is all about striking a healthy balance.