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During college, I had a fraternity brother, Tommy, who one day pulled up in a shiny new, white/black-topped Jeep. The thing was spotless, gleaming and beautiful. No comparing it to my beat-up, old ’88 Nissan Altima.
We were cash-strapped college students so I asked, “How’d you pay for that?”
Tommy grinned and said, “I put it on a credit card.”
That was 20 years ago, and I have no clue if you can actually buy a car with a credit card. What I do know: taking on debt – buying that shiny new toy – is easy. And from experience, I also know that getting out of debt – denying yourself that shiny new toy – is harder than hell.
Which is my painful segue into a painful lesson for law school grads:
Get your butt out of debt.
Blunt? Yes, but I gotta get your attention.
Ticked off? Some of you are. You’re thinking, “Easier said than done.”
Well (more bluntness), you’re right; not easy at all. Actually, it’s brutal.
Like Stepping on a Nail: You Don't Want to Do It, and It’s Gonna Hurt
Just out of law school (circa 1999), I was anchored to about $48K in law school debt, plus my wife’s student loans … so roughly $75K. Two years out of law school, even more debt – you know, new car, new house, gym membership … all that keeping-up-with-the-Jones crap. And with it all, the sheer terror of mounting bills and endless payments.
It took $25 to put an end to my terror. For $25, I bought Dave Ramsey’s The Total Money Makeover. I won’t get into the specifics, but Ramsey demands some strict money disciplines: cash only, adhere to a budget, build an emergency fund, snowball your debts. None of it’s easy; all of it’s painfully difficult. In fact, it took 8 plus years of “not easy” and “painfully difficult” to erase my debt.
For the Few Who Stuck Around
By now, I’m only talking to a few people.
Either it’s been heard before, or it sounds impossible. Easier to craft a snarky meme bashing your law school debt.
For the few who’ve stuck around, I can offer a few pointers. My debt-fight is now approaching 14 years, and through trial and error, I’ve learned a few things. Consider these 5 things if you choose to brave this rocky, but life-changing, road:
· Find an expert: If not a real person, then an expert in book form. Read Ramsey’s Total Money Makeover or maybe David Bach’s The Automatic Millionaire. Just find a good book with good information. Sounds simplistic, if not naïve, but these authors can offer tools and disciplines to help you chip away at your debt.
· “All or nothing” will be your death: Step 1, learn the rules. Step 2, choose only what’s comfortable. In Bach’s book, Automatic Millionaire, he offers a “that’s too dumb” idea called the “Latte Factor.” In a nutshell, you save $5-$10/day by skipping your daily Starbucks. Sounds like kids’ stuff, but if it’s the only thing you’re comfortable with after 228 pages, you’re still on the road to saving around $2000/year.
· Ironclad isn’t required: If you’re a masochist, you’ll follow these plans strictly and be out of debt sooner than later. If you can do that, I commend you. Me, I have to fudge the numbers. With two kids and five camps this summer, my budget has no choice but to be flexible. A periodic overspend isn’t gonna kill you. But with militant underspending and excessive self-denial, you tempt boredom, inflexibility and (worse) tyranny.
· Prepare to eat glass: Getting out of debt is painful. You have to sacrifice, and it hurts. The new car you want? Not until your old car hits 120K miles. That $100/month gym membership? Go run in the park. Need proof of the pain: I drive a crappy PT Cruiser (very painful!), but I haven’t had a car payment in over a decade.
· You can’t drive your savings: Let’s say that a year out of law school, your buddy (still deep in law school debt) buys a new, black Mercedes-Benz C-Class. Everyone gawks at his $39K beauty. They see it parked in his driveway, at the movie theater, in the law firm parking garage - all that shine and chrome verifying his legal success.
You? You drive a used car, but paid-in-full. And that $600 car payment you save – you’re cramming it into your 401K, maybe with a matching contribution from your employer. It’s a solid plan, but your ego’s gonna boil over because you can’t drive your 401K. You can’t park your 401K in the driveway, at the movie theater, in the law firm parking garage. Your 401K, like your growing savings and your shrinking debt, lacks the shine and chrome of sweet success.
From personal experience, I can honestly say that this sucks. Every debt cure has an ego disease; not a lot you can do about it. Take solace in the fact that your 401K, your savings, your shrinking debt – while not shiny – are the very definition of wealth. As Bach affirms in Automatic Millionaire:
How much you earn [or own] has almost no bearing on whether or not you can and will build wealth.
Or as Dave Ramsey puts it:
Your most powerful wealth building tool is your income. When you give all away in "payments" you lose.