I thought I would give a little history on our family’s finances and explain how we ended up dragging our feet on our student loans for over a decade. As I reflect back on our story, I’m amazed at how quickly life passes by when you’re not paying attention. I try not to focus on the time that we wasted and instead reflect on the things that we got right, but being reminded of our mistakes motivates me to keep pushing forward on our current goals. So here goes…
Mr. SIL and the future Mrs. SIL, unknown to each other at the time, graduate from college. Off to the real world they go, Mr. SIL with $43k of student loans in tow and future Mrs. SIL with another $10k. Sufficiently indebted, Mr. SIL goes about his first year in the workforce doing little further damage to his finances. Meanwhile, Mrs. SIL’s college car breaks down and needing reliable transportation for her Big Girl job, she “buys” a new car with a $17k promissory note. And just like that, Mr. SIL and future Mrs. SIL are on the board with a negative $70k net worth! No matter, Mr. SIL and future Mrs. SIL couldn’t care less what their net worth is at this point in their lives. Their only saving grace, if you could even call it that, is that they each sign on for their companies’ 401k plans.
Consumer-debt-driven worlds collide and Mr. SIL & future Mrs. SIL meet! A friendship ensues and shortly thereafter, they are happily dating. Endless fun is had at unnecessarily expensive restaurants and bars. That’s okay, they can afford it! To “build” her credit, future Mrs. SIL gladly slaps down her credit card every weekend and maxes it out EVERY billing cycle. Thankfully, she has the wherewithal to pay it off every month. Also, a shout out to credit card companies for having the sense to cap a recent college graduate’s credit limit at $3k.
Future Mrs. SIL has a eureka moment and decides that she is now an adult & must become financially responsible. She needs an emergency fund! So she wisely stops maxing out her credit card, leaving plenty of room in her $3k credit limit for emergencies. Smug little Mrs. SIL gives herself a well-deserved pat on the back. Life: figured out!
Finally, a turning point! One fateful day, future Mrs. SIL stumbles upon Mr. SIL’s student loan statements. Floored by the balance (and conveniently forgetting the absurdity of her own debt load), she decides that NOW would be a good time to discuss their individual finances. You know, since they’re in their 3rd year of dating and all. Luckily, it’s quite easy for both Mr. SIL and future Mrs. SIL to get on the same page. Plans are hatched and goals are set. They agree that, if they hope to take the relationship to the next level, certain milestones must be met. Under no circumstances would marriage be considered unless they could:
- Establish a strong career path for themselves and grow in their respective careers
- Fully fund their emergency savings
- Save for a down payment on a house
You’d think that we would have made student loan repayment a priority at this point, but since this is our pre-FIRE days (read: pre-get-your-head-out-of-your-a** days), we were of the mind that student loan debt was “good” debt. Debt was a fact of life, right? Plus, we could easily handle the payments and that’s what mattered…right? At this point, you’ve probably figured out that we were on an income-based repayment plan which made the payments super affordable but also stretched the term much longer than necessary.
Progress is made, and more importantly, Mr. SIL and future Mrs. SIL discover the power of setting goals and working together to achieve them. Mr. SIL joins a new team at work, a move that changes his view of work from just a “job” to a “career”. The work is not related to his undergraduate degree, but thanks to the power of networking and a strong work ethic, he settles into the kind of fulfilling work that eluded him his first few years out of college. Future Mrs. SIL continues to work her way up at her company, earning a second promotion in her 5 year tenure.
Emergency and down payment savings are fully funded. A house is purchased and shortly after, engagement! Both are pleasantly surprised at how much $ they save by living under one roof. They are able to super charge their savings and save a good bit for the wedding. Also, future Mrs. SIL pays off her car loan and piddles her student loans down to $3k. But sometimes…you take two steps forward and life pulls you one back. Effects of the ’08 crash finally make their way around to Mr. SIL’s team and he is laid off. Payments on his still sizeable student loans are put on hiatus.
Mr. SIL’s company quickly recovers and he is re-hired before emergency funds are depleted. Student loan payments resume. And…marriage! Another year passes in the life of SIL and with it, another missed opportunity to pay off student loans. Looking back, we could have easily paid off the loans with the amount that we spent on the wedding but hey, good debt right?
Mr. and Mrs. SIL settle into marital bliss, as do their student loans. Just. Can’t. Get. Rid. Of. Them. Perhaps the anniversary trip to Europe had something to do with it. Shortly after the trip, we find out that we are expecting! To prove to the unborn baby that we aren’t going into parenthood as complete irresponsible schmucks, we pay off Mrs. SIL’s student loans. Also, Mrs. SIL maxes out her 401k for the first time.
The family expands with Baby SIL’s arrival in the fall of 2012! We quickly realize that our 800 square foot house won’t be able to fit all of us (and the baby’s stuff) much longer. We start saving for a down payment on a new house. A cheaper but bigger one…which can only be found in the suburbs. A move to the suburbs means that we’ll need a second car, so we step up savings for that. At this point, any hope of paying off Mr. SIL’s remaining student loans is nothing but a pipe dream. In an effort not to perpetuate the cycle, we begin saving for Baby SIL’s college fund.
Years and years of saving (first for an emergency fund, then a house, a wedding, a second house, a car, baby’s college) have become habit at this point, and we realize that we’ve been living on the equivalent of Mrs. SIL’s salary and have effectively been saving Mr. SIL’s salary for years. A light bulb goes on and we realize that we can afford to be a single income family if we chose to. After some extensive thought (and probably misgivings about how demanding and exhausting it is to be a stay-at-home parent), Mr. SIL green lights the decision and we decide to have Baby #2. Never mind that after nearly a decade, Mr. SIL’s student loans are still around.
Massive changes this year! Buy new house. Move into said house. Rent out old one. Baby #2 is born. Buy second car (in cash, thankfully). Mr. SIL becomes a SAHD. What hasn’t changed? Mr. SIL’s student loans. Still here!
As we settle into life as a single income family, we realize that expenses associated with a bigger house, an additional car and a second baby were harder to predict than we thought. Before we pulled Mr. SIL from the workforce, we carefully allocated an amount in our budget to be able to continue his retirement savings. A few months into single incomehood, we realize that those amounts would be needed to fund day-to-day living expenses. However, in a wild stroke of luck, Mrs. SIL is presented with a job opportunity that allows the SIL family’s income to exceed what it was making as a dual income household. While it was tough to leave the company and team that I dearly loved, the new job was the best choice for our family. And that’s something that Mr. SIL and I have always known about ourselves: family first. The new job meant that we no longer had excuses to delay student loan repayment and we pay off Mr. SIL’s loans exactly 12 years (to the month!) after graduation. Also, we follow through with our original plan to save for Mr. SIL’s retirement during his SAHD career and begin funding his IRA.
Present day – the jury’s still out on what will happen this year, but we’ll be sure to let you know!
So there you have it, folks. That’s how 12 years with student loans flash right by. Life happens and student loans give way to more pressing obligations. Next thing you know, more than a decade has passed and you’re still paying off all that beer and pizza you consumed as a co-ed. Had we not discovered the FIRE movement, we’d probably still have those loans around. On the other hand, we’ve been pleasantly surprised to find that you can save haphazardly in the background and end up in decent financial shape despite taking 12 years to pay off student loans. Our net worth is at a respectable level for our age and as such, we subscribe to the thinking that investing early and often will lead to surprisingly good results. So for those of you still burdened with student loans, keep chipping away at them and be sure to save a little for your other goals along the way!