My story is very boring. I didn’t win the lottery or find some benefactor. I had a high salary, which is in line with what I expected from my degree. Then I lived reasonably but frugally.
I love the boringness of my big debt payoff story. Of course, others can find it disappointing for being so boring. With student loans exploding, people are looking for hope. The stories with the highest debt and the lowest incomes get a lot of fanfare but they’re not realistic. This can be a problem if regular people start thinking that paying off big debts is easy – it’s not. Getting into big debt on a low-income is a disaster. We need to stop normalizing big debt payoff stories and start glamorizing boring debt payoff.
The Problem with Exciting Debt Payoff Stories
Yes it’s intriguing to read about how someone can pay off a huge debt without a big salary. But big debt payoff stories are getting too trendy. Bigger, more outrageous stories are constantly pushing more typical stories down. Big debt payoff starts to sound normal, and that’s bad.
Consider what happened when I was interviewed for a site regarding my debt payoff story. One of the comments said something to the effect of:
Well of course she could pay off her debt with her high salary. Why can’t we have more stories of people who quickly pay off large sums of debt on low salaries?
The commenter might as well have asked why don’t we see more miracles. The main reason we don’t have large debt payoff stories from the low-income is because the math doesn’t work.
My $112k loan would have cost $1,200/month for 10 years. If we assume that someone makes a median salary of $42,000/year after taxes or $3500/month, that’s 1/3 of their salary for the next 10 years. Of course that person can increase their salary and then write about how they paid off their debt in fewer years with a higher salary – cue the criticism. But the higher salary is a necessity, not a flaw in the story.
Big Debt Means Big Problems
There are stories of people who graduate with hundreds of thousands of dollars of debt who work at the poverty line. Yes, this makes for the start of an interesting story but the vast majority of these stories do not end well. This is not something to aspire to. It’s not healthy to think that these stories are anything but extremely stressful and uncertain.
People shouldn’t get into big student loan debt and have a low salary job. Let’s not pretend that this is a normal situation with a likely happy ending. If you have a huge debt load, your solution is to get a higher-paying job or a rich ailing uncle.
Often when I see someone paying off huge debts on a low- to mid- salary, they give advice, which is really a listing of their lucky breaks. The number one piece of advice is “live rent-free with their parents.” Most people can’t get free rent from their parents close to their work. That’s a lucky break. Ditto when someone mentions inheritances, selling off big-ticket items, significant others who subsidize living costs. This is not personal finance advice – this is just bragging. You might as well just say, I used this big pile of money to pay off my loans – and you can too!
Low, Slow Debt Payoff is the Norm
Having high debt with a low salary is a dire situation that requires immediate action, not a fun frilly story for our lunch breaks. Yes, these stories reel us in like a mystery that can be solved – but there are no magic cures. Either the person drastically increases their income or is saved by luck. You save yourself or someone else saves you. There are no other alternative for a happy ending. What we should be talking about is why this person needed to be saved in the first place.
The reason we don’t hear about high debt -high salary or low-debt payoff stories is because they’re boring. But boring payoff is normal, it’s good, it’s low-stress. That’s something to celebrate, not dismiss.
It’s good to remember though that low, slow debt payoff is normal and having high debt is atypical. While the numbers of those with six-figure debts is rising, it’s still only 6% of all student loan borrowers. Those with high debts are overrepresented in defaults – at 30%. But those with high debt also likely took on those debts to secure high-paying jobs – such as doctors, lawyers, CEO. High debt is not meant for low-paying jobs.
Big Debt Payoff Disguises Big Problems
Yes we can congratulate and admire someone for having the fortitude to pay off a mountain of debt. But we need to acknowledge that these stories are outliers. We need to talk about out-of-control higher education costs and how easy (and dangerous) it is to get into ridiculous amounts of debt for low-paying degrees.
When I was a high school senior, I thought taking any kind of student loan debt was fine and normal. Because my parents had saved for my education, there were no repercussions for my ignorance. But for those without the means to make these mistakes, this ignorance about student loans could be the biggest mistake of one’s life.
There’s no need to blame those who take on too much debt – it’s the system, not the person at fault. But we have a role in ensuring that fewer people do it. It’s dangerous to normalize the idea of graduating with a ton of debt with only low-income job prospects. We have to ensure that people realize how dire a situation can be with high debt.
Let’s Not Forget The Fundamentals of Finance
It’s great that there are inspirational student loan debt payoff stories. But let’s not forget the fundamentals – the rule of thumb is not to have higher total debt than your median first year salary. Also generally don’t to go to NYU. Or get an MFA.
If you are planning to buy a car, people will tell you to plan for the costs of the car and for maintenance. They won’t bring up internet articles of people who bought a Ferrari and happened to win the lottery to keep up with the costs. Don’t let hope be your Plan B. Also don’t let it be your Plan A.
Big debt payoff stories make it seem like you can go into serious debt without a plan, fumble around, and recover with amazing results. It’s a fairy tale. And it’s frightening to think that others might underestimate the danger of poisoned apples because of others’ happy endings.
Conclusion – Stop Normalizing Big Debt Payoff
So yes, I had six figures of debt and six figures of income. My debt payoff story is really boring. I’m proud that it’s boring.
I don’t want to encourage anyone to have an exciting debt payoff story where they pay off a crazy sum of money in a short period of time on a low salary because, even if successful, that’s a recipe for a very stressful life.
Boring is good when it comes to money. Prevention is most of the battle. And even better if you go your own way. Small debts, rising incomes – we should normalize and glorify that.
Being bad at math is often used as an excuse to be bad with money. Never mind that one still needs to learn about and manage one’s own finances. Still, no matter how badly one’s math grades were – money is not about math; it’s about emotions and expectations. This is how expectations destroy finances.
How to Be Good at Math and Bad with Money
We equate being good with money with being good with math because there are numbers involved. But with online calculators, banking and Excel, it’s no longer necessary to do one’s own addition or subtraction.
Even if you don’t do the calculations, your bank will tell you if you’ve spent more money than you have. And if you spent too much, you don’t need math to keep you from spending more.
The problem is not knowing when the math doesn’t work out – it’s continuing to spend more than you can afford to. This is not a problem that can be solved with basic algebra.
How to Be Bad at Math and Good with Money
In high school, I was very good at calculus but I tended to (and still tend to) make egregious errors in arithmetic. Self-awareness goes a long way though. I knew that the only reason I would need to use math in my finances is if I spent more than what was in my account. It didn’t matter if I got the end number right or not – it only mattered that the account had money still left in it.
I could have learned to be great at math and always spend just shy of what was in my account. Instead, my secret was that I spent far less than what I had in the bank. That way, I wouldn’t have to use any math at all. Lots of money minus not a lot of money equals no problem.
What Really Destroys Your Finances- Expectations
A law partner once told me that people can tolerate nearly any situation so long as they have notice of it. That is to say, if you match or exceed the expectations, people will be fairly satisfied. But once you drop even a little bit from one’s expectations, tempers flare.
If you think about it, everyone view life through the prism of their expectations. Some reviews of Pixar movies are lower those of trashy movies because the reviewers expected more. The FIRE Festival was mostly a scandal because it (fraudulently) failed to live up to the lofty expectations of its attendees.
Marketing deals exclusively in the realm of expectations, usually subconsciously. When we buy this makeup, we are thinking of being as beautiful as the model in the ad. Visiting a staged house helps us envision what it would be like to live there. Vacation brochures make us feel like we will finally find inner peace in Tahiti. And then we buy, buy, buy, and we never get the perfect feeling shown in the advertising. And yet we continue to buy, chasing the next advertising promise.
How Expectations Ruin Our Finances
When I graduated from college, I expected the life my parents had when I was growing up. Never mind that they had worked for decades together in order to create that life. They were the adults I knew best and that was the adult life I understood. I’m not saying it made logical sense – it’s just what I subconsciously expected my adult life to be like.
These days, it’s easy to look at Instagram, Pinterest, or any lifestyle magazine and see the life one “should” be living. These are where we get our expectations. And it’s not rooted in logic or math. It’s rooted in marketing and emotion. So long as we can identify what expectations are realistic, we should be ok, right?
A Case Study in Expectations
In an earlier blog post about dating and money, I talked about how my ex and I used to fight about who would pay for our meals. It was not a question about lack of money – either one of us could have covered all our meals without a problem.
Like so many fights, what we were explicitly fighting about was not the real cause of our problems. You fight about chores with your spouse, but you’re really longing to feel appreciated. You fight about curfews with your kids, but you’re really projecting your own anxieties about them growing up.
Our fight wasn’t about money – it was about our expectations of what the other person should do, or should want to do. It was about how much he loved me or how much power I had over him.
How Expectations Can Ruin Our Relationship with Money (and with Others)
Where did my expectations come from? Well, in my household, my father paid for everything. When you hear me say that, it would seem like I expected everything to be paid for. But my parents made similar salaries and they had a joint account. So when I say my father paid, my mother earned half the money. The main sacrifice was that my dad carried his wallet around and my mom didn’t have to. They were both responsible for funding everything, but in this arrangement power and love were balanced.
My parents hated the idea of splitting the check, but their way of paying wasn’t meaningfully different than going dutch. It’s all exactly the same math-wise because all the money came from their joint account. Their payment arrangement had nothing to do with the math and everything to do with emotions and expectations.
My mom liked feeling taken care of even if she was paying for half. I knew the whole thing was a ruse but it was a cute ruse. The money part worked because everyone’s feelings were attended to.
When Math Won’t Solve Your Money Problems
It was pretty stupid for me to want my parents’ situation in my relationship with my boyfriend. We weren’t married. I made more than him and we didn’t have a joint account. When he was treating me, there was less money for him. I wanted the same emotions but it wasn’t the same math.
Of course, if we had made it perfectly equal, I still wouldn’t have been happy. I needed to adjust my expectations. I made more than enough to pay an equal share. I made more than enough to pay for everything. But I was equating money with affection, and that’s a dangerous misconception.
How Expectations Were Ruining Our Finances
My ex’s mother stayed at home and his father had the career. His previous and later girlfriends all made less money than I did, and far less money than he did. He had no problem treating them.
For him, I think our fights about money were really about power. If I was going to have a fancy job and make a lot of money, he should get a nice dinner.
In the end, we could have made it work. If we had just handled our emotions, the finances would have fixed themselves nicely. But the emotions were out of order, and that ruined our financial relationship.
How to Adjust Your Expectations
When you realize that you equate money with love, power, value, identity, etc. the way to get out of it is not to blame the finances. You have to learn to get your love, power, value, identity from something that is not money and not something that can be bought.
For instance, a few years ago, while I was still working at a law firm, I dated a guy and on our first few dates, we went dutch. In terms of the math it made sense. He was a graduate student and I made 6x what he did. Still, I took the action as a sign that he wasn’t interested. But he kept asking me out on dates. I couldn’t figure out what was going on. So what did I do?
*Mind blown* What? Honesty has no place in dating, I can hear you all say. But I asked him, and he answered that he did. And that was the basis for our relationship. He liked me, I liked him and we communicated it via words instead of implied it with actions involving money. I’m not sure if this is how adults have relationships, but I’m going to try it more often.
We might say that we “need” the guy to pay for dates to show that he cares. The other way he can show he cares? By using his words. It was a very cheap solution to the problem, and ultimately much more satisfying than anything money could buy.
Conclusion – Expectations Destroy Your Finances
I read two books directed at women on money and relationships – and they both invoked fairy tales. It felt a little silly to talk to grown women about children’s stories but it makes sense that little girls internalize these tales and use them as blueprints when they become women.
The problem with fairy tales is that the lovers rarely communicate at all with each other – let alone unpack their psychological and emotional baggage. Lack of communication is usually the “romantic” part of it. Prince Charming can’t even find Cinderella after the ball. Sleeping Beauty and Snow White are asleep. Ariel has no voice. And yet they all live happily ever after.
So much of their actions are steeped in symbols and meaning. The stories make it seem as if couples can instinctively know without communication. But fairy tales are not reality. Instead of using glass slippers or little blue birds, or even money, introspection and honest communication is how you get the things you want.
I learned long ago that I’m not an organized person. My hands seem to play tricks on my brain and I can never remember where I put things. But I have figured an easy hack to keep myself from sorting through heaps and piles of things – I just get rid of the heaps and piles. I’m neither a minimalist or a maximalist – I believe in having the right amount of stuff that fits your lifestyle. Minimalism helps you find the right amount of things. Here’s how minimalism helps us remember what really matters.
When Stuff Distracts You From What’s Most Important
Outside the customs area of Detroit Metropolitan Airport, I saw a swarm of activity around a couple with a small child. They had left their passports on the plane (at least that was the best case scenario).
And at first I felt sympathetic because traveling with a small child is difficult. But still there are two of them and they could have tag-teamed with one person remembering the child and the other person remembering the passports. I’m sure they remembered the diaper bag and their luggage after all. But the most important things by a long margin are 1) the baby and 2) the passports. Everything else – whether money, a phone, or another travel accessory – could be remedied after customs.
They were probably distracted by the luggage. If they had only brought the baby and the passports, then there wouldn’t be a problem. The more things you have to remember, the more likely you are to forget something. Unfortunately for them, they forgot the most important thing. They were so distracted with things that could easily be replaced that they forgot what couldn’t be replaced.
The Cost of Your Stuff
I bought a TV recently. This is the first TV I’ve lived with in over 20 years. The TV itself was only a few hundred dollars but I started to reflect on the other costs having a TV entails.
For instance, when people come into my apartment, one of the first things they mention is the lack of TV. Now the living room is very TV-centric. And when I sit on the couch, it just seems normal to turn the TV on. Though I multitask while watching the TV, it’s never as efficient as having the TV off. And watching TV precludes some other activities like listening to music or reading. So the TV isn’t just a financial cost – it’s a mental and time suck.
When Stuff Holds You Back
I read a book recently where the author recounts how her grandmother, tired of taking care of her infant brother and doing chores in rural Appalachia, leaves the house and moves clear across the country. At the mature age of 13.
These days I hear a lot of people talk about moving for new opportunities, for dreams, for reduced costs of living. And I always hear excuses. These are adults, with some means, with access to planes and online job searching and side hustles – and yet they can’t seem to do what a 13-year old girl was able to do at the turn of the century.
Part of the reason is their stuff. It costs a lot of money and headache to move all your stuff. The stuff we have keeps us in place. Our stuff keeps us rooted in the same ways and stops us from exploring.
Minimalism Can Apply To Experiences
Minimalism doesn’t just apply to stuff. Having too much to do can also distract us. Most people agree that time is our most valuable resource and yet we squander so much of our time on the Internet, in needless bickering, complaining, worrying. We don’t spend the time reaching out to our loved ones, connecting with new friends, meditating, exercising, nourishing our souls – you know, the stuff that really matters.
How Minimalism Reminds You of What Really Matters
If we stop and think about our lives, we can name a few things that are the most critical and the rest is nice, but it can be replaced. It’s the stuff that you run back into your burning house for (usually people, but certain items or documents make the cut as well). The rest of it is just crap.
There’s nothing at all wrong with stuff. But we each have a different amount of stuff we can handle before we start to forget the most important thing. For me, it’s a pretty low number because I’m disorganized and easily overwhelmed. But there are travelers with tons of luggage who still get everything together and there are backpackers who can’t keep it all straight.
Tips for Minimalism Helping You
Minimalism helps me when I start every day or every endeavor remembering what’s the most important.
packing (and keeping track of) the most important things first -the passport and the baby. Or a wallet, keys and phone when you’re out. This way you don’t walk out with dozens of items and forget what you need.
writing down the most important goals for your day before scheduling anything
just doing the most important things
just cutting out the things that get in your way. The friends, appointments, activities, clutter that don’t enrich you.
Conclusion – How Minimalism Helps Us Remember What Matters
Minimalism isn’t about how much stuff you have; it’s about ensuring that your stuff doesn’t distract you from what’s most important. If we have too much stuff for us to handle and care for, or the stuff we have takes too much of our attention, then we may need to check ourselves.
But as long as you have your passport and your baby, it doesn’t matter how much other stuff you have.
During this time of uncertainty, everyone is looking for ways to save money. Even small amounts can add up to an emergency fund or just that added bit of security we need to get us through. Here’s an easy money tip that has saved me thousands over the years.
Many believe that the world is objectively at its worst right now and that anyone who would say otherwise is stupid or ill-informed. To that, I’ll say you’re objectively wrong and, even if you were objectively right, you are still wrong to act in a pessimistic way.
I’m still an optimist (yes, even in 2020). And I’ll tell you why I refuse to succumb to pessimism and why everyone should be optimistic, even you.
Many people think the American Dream is dead – but immigrants like my parents continue to escape poverty. Spoiler: it wasn’t primarily through hard work.
It’s ingrained in the national psyche that “all you need” to achieve the American Dream is to “work hard.” But there are plenty of day laborers and minimum-wage or gig workers who will never get ahead. Hard workers are not hard to come by, but hard work is not enough to succeed in America. Truth is, America has never cared that much about hard work. Why do we keep perpetuating this myth?
My parents came to this country with very little and are very comfortable now. My parents didn’t work that hard. And by that, I mean to say, they weren’t toiling in the fields, doing back-breaking labor. They weren’t working crazy hours hustling. They worked hard on a few finite items that I believe led to their ultimate success. Here are the reasons I believe they were able to escape poverty.
Why do nice girls finish last? Being “nice” is different than being “kind”, even though the two can look the same from a distance. Being nice is performing acts in order to get something in return. Being kind is treating people with compassion without any expectation of return. Surprisingly, despite the lack of manipulation, being kind will get you far in life while being nice will give you nothing but frustration. Always be kind, don’t waste time being nice. Nice girls always finish last.
My friends still talk about the buffet to this day – raw oysters, fresh shrimp, smoked salmon, caviar, fresh carved prime rib. And all sorts of other foods that were delicious (and expensive). Beautiful ambiance. It was cheaper than what we thought they could charge, but it wasn’t so cheap that we suspected something.
It was great but it was also all a bit too much. It was fun mixed with guilt, and the guilt subtracted from the fun.
Sometimes excess is actually an obstacle to being happy, and it’s very possible to have joy even on a bare bones budget.
The 50-20-30 budget is one of the most popular budgets according to personal finance “experts.” In it, you spend 50% on needs, 20% on savings/debt reduction and 30% on “wants.” This is a terrible plan for almost every income and lifestyle. The 50-30-20 budget is stupid and I will show you a better way.
How to Waste Money on a Budget
The 50-30-20 budget has pitfalls for entry-level and high salaries alike. First, let’s consider the following hypothetical spending of a 23-year old singleton college graduate who makes a slightly below average entry level salary of $38,000/year ($30,000/year post-tax) and has 4% salary increases:
I was chatting with someone about who’d you most like to be quarantined with and we were debating the perks of being quarantined with a billionaire. He figured that any billionaire would have a fantastic personal chef, but I wasn’t so sure. Billionaires tend to have weird eating habits. Extra money means more options – it might mean you can try things you hadn’t had before. But money doesn’t change what you like.