I’m honored to share a great Debt Free Story with you today! It comes from Financial Panther, a lawyer who paid off substantial student loan debt (and continues to build wealth, even after a pay cut). Read on to see how debt freedom allowed him to escape those golden handcuffs.
I graduated law school in the same position as most lawyers – with mountains of student loan debt. I was 26 years old at the time and about to start my first real job. Luckily, I had landed a high paying job at a good law firm in town. Unluckily, I was also starting out my working career $87,000 in the hole. Turns out law school is pretty darn expensive.
It’s not uncommon for students to come out of school with a ton of debt. In a lot of professions – jobs in the legal and medical field come to mind – debt is just completely normal. Most lawyers and doctors graduate with six figures or more of debt, then spend the next decade or so letting it hang around. The student loans don’t really bother them because they’re making a great salary. With my new job, I could have easily afforded a fancy apartment and expensive clothes, all while diligently paying my monthly student loan bill for the next decade of my life. Basically, I could’ve been completely normal.
The problem with living normally is that you can end up stuck and without a lot of options. I pretty much knew right away that life in a big law firm wasn’t for me. It was no secret that a lot of my colleagues felt the same way about the job. But a lot of people ended up relying on the big paycheck. And as those people bought more things and ended up with more bills, they ended up needing that paycheck more and more. A big shot lawyer or doctor might look like they’re living large, but really, they’re probably stuck, relying on the paycheck to pay for all their stuff. It’s the definition of the golden handcuffs.
I didn’t want to be stuck. But with $87,000 in student loans, I really didn’t have many choices for jobs. That’s why as soon as I started working, I began doing everything I could to pay off my debt as fast as possible.
Avoiding Lifestyle Inflation
The most important thing I did during my student loan repayment journey was to avoid lifestyle inflation. It’s funny how fast we can spend money once we get our hands on it. I’ve noticed that with a lot of people, things that once weren’t a necessity, suddenly become a necessity after you start making more money. During law school, I lived in a fairly shabby house with three roommates. Most of my classmates did the same thing. We didn’t really have a choice because none of us had any money.
But once we graduated law school, suddenly living in a normal apartment with a roommate was out of the question. Instead, everyone needed to move into their own luxury apartment. And with the luxury apartment came the fancy clothes and the expensive bars and restaurants. I had one colleague who spent an entire paycheck each month on rent for his penthouse apartment. It was crazy! Could he afford it? I guess so. But there was no way he could make a dent on his student loans with that much money going out the door for rent. And there was definitely no way he could ever leave that job.
I chose to avoid lifestyle inflation as much as possible. Instead of upgrading to a luxury apartment, I lived in tiny, one-bedroom apartments with my fiance. We didn’t eat at particularly fancy restaurants when we went out. We definitely didn’t wear really fancy clothes. And I still took the bus or biked to work like a regular person. I didn’t need any of that fancy stuff before. There was no reason that I suddenly needed it now just because I was making more money.
Treating My Income Like A Bonus
I know that you shouldn’t compare yourself to other people, but I just can’t help myself. I think the key, however, is to compare yourself to the right people. For example, a lot of us who are really interested in personal finance never really feel like we’re depriving ourselves of anything, even though a lot of people might see it that way. I think it’s because we tend to surround ourselves with like-minded people. Saving 50% of your income is pretty crazy for most people. But in the personal finance world, it’s not all that out of the ordinary.
If I had compared myself to all of my lawyer buddies who were renting luxury apartments and otherwise living baller lifestyles, I probably would have felt like I was depriving myself of something. The way I avoided that feeling was to remind myself that I was making way more money compared to other people my age. Instead of comparing myself to a big shot lawyer, I instead compared myself to a regular 26-year old making a regular 26-year old salary. My friends making $50,000 per year were doing just fine. All I had to do was live like I was making that much, and I’d have a ton more money to throw towards my debt.
All of the extra money I earned was treated like a bonus, which I then pushed towards my student loans. Since I didn’t act like all of the income was a part of my salary, it was much easier to throw it towards my student loans and not feel bummed out. It’s a big mindset shift when you remind yourself that a lot of people already live on less by necessity.
No Debt = The Flexibility To Do Whatever You Want
I started my student loan payoff journey in January 2014 and made my final student loan payment in June 2016. I’d taken out my initial student loans at 23 years old, spent the next 3 years accumulating more loans, spent 1-year sort of goofing off, and then spent 2.5 years paying it all back for real. At 29 years old, I’m now debt-free.
It’s amazing how many more possibilities open up to you once you’re no longer saddled with student loans. The more money you spend per year, the higher paying a job you need to get. If you’re a big shot lawyer spending $100,000 per year, then no matter what, you’ll always need to have a job earning at least that much. If you once had the entire universe of jobs at your disposal, suddenly, you only have a small subset of jobs that you can afford to take. You reduce your flexibility.
With my debt gone, I suddenly had a whole universe of jobs at my disposal. I didn’t have to stick around in a job I didn’t really like just because I needed the paycheck. As soon as I paid off the last of my debt, I ended up finding a new job with a much better work-life balance. The job also came with a $50,000 pay cut! Even with the pay cut, I’m still able to save just as much as I was saving before simply because I had gotten so used to living on less. That fact still surprises me a little bit – perhaps another benefit of avoiding lifestyle inflation.
In the end, the only way to pay off debt fast is to put a ton of money towards it. You have to live on way less than you earn. Make sure you appreciate what you already have. Avoid lifestyle inflation. Compare yourself to the right people, not the wrong ones. Pay off your debt as soon as you can, and give yourself options.
Thanks so much for sharing your inspiring story of debt freedom, Financial Panther!
Financial Panther is a lawyer that paid off $87,000 worth of student loans in 2.5 years by choosing not to live like a big shot lawyer. In his spare time, he likes to side hustle using various sharing economy and gig economy apps. You can learn more about Financial Panther by checking out his blog at www.financialpanther.co, where he writes about personal finance, paying off debt, and side hustling in the sharing economy.