Our path to financial independence didn’t get off to the best start. By any definition, we are drowning in debt. After sixteen years of post-secondary education between the two of us, rock bottom was February 20th, 2014, our outstanding debt reaching:
How could this be? What disastrous decisions had we made to find ourselves in such a crushing situation?
The truth is, we signed up for it.
We knew we would find ourselves here.
We did it anyway.
My wife and I were married the summer after we graduated from college in 2009. We had both made the decision to further our education and attend post-graduate programs. My wife had the intention to go to dental school, while I wanted to pursue my Ph.D. in engineering. That summer we sat down and ran the numbers. While I would get a modest stipend that would help cover a large amount of our day-to-day expenses, there would be nothing left to cover the tuition and fees that my wife would accrue for four years in dental school. We also had undergraduate student loans gaining interest month after month.
We had little choice but to fully finance my wife’s dental school education. That summer we projected and prepared for the idea that our net worth would drop to roughly -$400,000. In the end, however, we didn’t account for tuition increases, stipend decreases, and a few other expenses along the way that made the number significantly lower at -471,000 in the spring of 2014.
The hardest part wasn’t hitting rock bottom. It was earlier on during graduate school knowing that the worst was still coming. For four-plus years we were intentionally digging ourselves into a huge hole that was dwarfing our debt from undergrad. We knew it was going to take many years to crawl back out just to get to zero. Just to get to the financial position that we were in when we started all of this when we were 18. At the time we thought the reward would be worth the cost. We were sold on the idea of investing in ourselves to get the careers of our dreams.
Fast forward to today, January of 2017, and we still have a mind-numbing net worth of -$150,000 with an outstanding loan balance of -$390,000. We both have the careers that we fought so hard to get, and we’re on the journey of crawling out of debt. During the first few years of our working careers, though, our focus has changed as the idea of a 35+ year career to reach ‘retirement age’ has put a bad taste in our mouths. It’s not that we dislike our careers. In fact, all things considered, we each enjoy the jobs that we have. We know, however, that there has to be something better.
As ridiculous as it may sound at first considering our current financial situation, we are planning on early retirement.
Early retirement these days has come to mean calling it quits in your late 50’s, but we really have no interest in, nor do we plan on working that long. I was initially attracted to the possibility of chopping 10, or maybe 15 years off of my working career. Maybe calling it quits in our early 50’s was possible with a strong focus from the beginning, even if we were starting half a million short of zero. The thought being that we are spending SO MUCH on paying back student loans each month, that once they are finally paid off, we will have a large surplus of money each month that we won’t ‘need’ because we will have become accustomed to our current level of spending. The plan was simple: invest the surplus in an effort to cut down the length of time required to reach financial independence.
Still, we weren’t satisfied.
What if we accelerated loan repayment and accumulated savings more quickly? Considering our starting point, was retiring in our 40’s possible? How about our late 30’s? As improbable as it might sound, this is exactly our intention.
My wife and I plan to retire prior to our 40th birthdays. To do this, we are focusing on minimizing unnecessary spending, making the most of every extra cent, and working to build our net worth each and every month. With our respective salaries each in the low six figures, and our current level of monthly spending, we believe we will be able to walk away in less than a decade with enough saved to last us indefinitely. It’s not going to be a perfect journey. There are going to be bumps along the way and mistakes will be made, but together we feel like this is a real possibility and we have every intention of making it happen.
A quick google search for ‘massive debt repayment’ or ‘paying off huge student loans’ is filled with stories of how someone was able to handle debt in the upper five digits, or even the low six digits, but information for borrowers in significantly more bleak situations seems to be more difficult to find.
I’m hoping this provides an interesting perspective as we aim to show real-time progress on how we will achieve our goal, rather than sharing our experience after the fact. If nothing else, making our journey public will help with accountability.
So here we go, from the beginning. Well, nearly.