After my last post painted my financial life as practically perfect, I felt the need to elaborate just a bit on my history. Yes, my finances may be smooth-sailing right now, but that wasn’t always the case…
I’ve been in debt three seperate times in my life:
- Student Loan Debt to study abroad (2005): $5,500
- Credit Card Debt (2006): $3,500
- Car Loan Debt (2005-2008): $17,000
Unlike many personal finance bloggers, I started this blog after I became debt-free. For this reason, I have to decided to tell you all about my debt history this week. I learned a lot from being in debt – in fact, I think that debt itself showed me the way to financial peace.
MY FIRST DEBT
I’ve mentioned before that I was lucky enough to have my parents pay for my college experience. I realize this is a huge blessing and many people come out of college with tens of thousands of dollars in student loan debt (including Lloyd!).
My junior year of college, I was given the opportunity to study abroad in the beautiful country of Spain. (Side note – if you ever get the chance to study abroad, do it! It’s a life-changing experience that only presents itself during the college years.)
My parents had always agreed to pay for 4 years of college and no more. Studying abroad didn’t fit into that category, so I took out a student loan for $5,500. The loan covered room & board with a host family, round-trip flight, classes at the Spanish college, excursions, and spending money in Spain (including many, many nights out on the town that I can’t detail on my blog 😉 ).
Just over five-thousand dollars seemed like a great deal for everything I was getting – and it was!
Of course, I had no money to pay off the loan during my senior year of college so I waited until I had graduated to start paying towards the loan.
After college, I endured living with my parents for about a year to get my finances under control. I remember feeling just sick to myself that I had five thousand dollars sitting out there that I owed to the federal government (you know that sick feeling that debt gives you? That’s what I mean). I hated having debt so much that some months I threw 75% of my income to my debt. My biweekly paychecks were about $950 at the time and I always had a goal to put at least $700 of that to my loan. Sometimes I met that goal, sometimes I didn’t. I didn’t even care that I couldn’t buy a fancy new wardrobe for my new full-time career. I had a debt to pay off and I was going to do it fast.
Living with your parents is the best thing you can do for your finances. On the flip side, it can sometimes be disastrous to your relationship with your parents after you’ve been on your own at college for 4 years! 😉 Since I had no expenses whatsoever when I was living with them, I was able to pay off my student loan debt in about 6 months – from July through November of the same year I graduated.
This seemed like quite an accomplishment to me! I think at this point, getting into debt again in the future didn’t really cross my mind. I think I figured that student loan debt was it and I wouldn’t have to deal with anything like that anymore. Wrong…
Very soon after I became debt-free for the first time, I turned around and took on the biggest debt I’ve ever had: a new car loan.
Stay tuned for Part 2!