Day 0 | $10,591.35 paid | $61,484.23 to freedom
The 1,000-Foot View
I am a high-school teacher, currently approaching the end of my second year of full-time employment. I graduated from the University of Michigan, College of Literature, Science and Arts in 2010 and immediately enrolled in graduate school to earn a Master’s in Education and my teaching certification in the state of Michigan to teach math and computer science. During my first year of employment I taught at a Maryland boarding school which allowed me to make a major dent on my private student loans ($10,000 of my $72,000+ total) while my federal loans sat in deferment until 6 months after my graduation in August of 2011.
Since then, I have enjoyed a great start to my career but also moved back to Ann Arbor, Michigan to take an amazing job in my adopted hometown. This past winter I was able to pay off the private loan thanks to an extra stipend I received for coaching. Since that point, however, I haven’t really made big strides on the loans. With some major purchases/repairs behind me, that should change quickly.
My goal is to be debt-free by 30 years old – January 19, 2017. This isn’t a sexy stunt that will be done by the end of the summer. As the saying goes, “It’s a marathon, not a sprint.” How this will be accomplished, of course, is the question. I am not in a profession that lends itself to nice bonuses or even predictable raises. Right now in the education field, you are lucky to get any raise. There’s no promotion on the horizon nor a chance to jump ship to a higher-paying firm. If I’m to accomplish this goal it will be through frugality and side jobs.
The plan is… a stretch. And if you’re powers of mathematical observation do not fail you, you’ll notice the plan is also $10,000 short. After the first year, these values are somewhat arbitrary and very optimistic. I think, if I push myself big time and am able to avoid major, unexpected costs, I’ll be able to take down $5,000 of principal by January 19, 2014. Of course, the major initial obstacle is the massive interest I am accumulating with $62k earning 6.5%. Therefore, I’m banking on the snowball effect here. As I pay down the principal, the interest shrinks and I can pay even more down. I guess the idea is I am not paying that much more in subsequent years, but the amount that goes towards the principal increases. Simple as that. As for the $10k shortfall – I don’t know. Like I said, this is a marathon and not a sprint. One of my goals over the next 6 months is to do a better job and building up my rainy-day fund (while simultaneously paying down the debt as much as I can). I guess if I do this correctly, that by age 30 I might have that rainy day fund up to $10k and when the time comes, I can make the choice between making a Mortal Kombat-fatality-style final blow or examining my options then. Right now, the focus is on year one.
Year One Goals, Initial Financials
According to my calculations, my student loans accrue approximately $321 of interest per month. My minimum monthly payment on my current set-it-and-forget-it repayment plan is about $421. Now that I have a new loan servicer, it is a little easier to track all this, however, I am still trying to nail down the exactness of how my loan is accruing interest. I had initially thought that my $421 payment was only the interest, per my graduated plan. However, my calculations suggest otherwise – in a good way! For now, though, I’ll assume that the $421 is the monthly accrued interest and anything above that goes towards principal.
Going with this assumption, I need to pay another $380 a month towards the principal of my loan in order to hit my $5,000 goal for 2013. This does not include approximately $1,500 I expect to make during (one of?) my summer jobs which should cover the shortfall. If my calculations are correct and the $421 actually exceeds interest, then this becomes much more doable. As it stands, I am going to be increasing the amount I put towards student loans by about $180 per month, with all that money, for the time being, coming from cutting costs.
I won’t go into extreme details about my salary. Suffice it to say, I make what just about any other second year high school teacher with a Master’s degree makes in a city with an above-average (maybe “high” is the better word) cost of living. My salary is supplemented in a few ways:
- Coaching: I coach two sports at my high school, in addition to my base-contractual duties. Next year, starting in July, this will result in an additional stipend for each sport. I’ve asked them to be spread out over 12-months so I am not waiting until February for my soccer pay. This also means I won’t have all my soccer and basketball pay by the end of those seasons, but I think the effect on being able to crush and snowball interest will be negligible. Having the income at regular intervals makes things simpler.
- Officiating: Throughout college I officiated sports to cover my spending money and other expenses. I worked my way up through Intramurals, to high school soccer and basketball, to scratching the surface of collegiate basketball. However, now that I coach those two sports, my officiating is limited to Spring/Summer slow-pitch softball. It is easy, fun, and good money: $30 per game. During my heaviest softball load, I made about $1,800 in a summer. I hope to increase that, but since I took last year off while living in Maryland and there’s a new coordinator scheduling us, I am only going to plan on earning $1,500. Hopefully, this is an extremely conservative projection. There’s a lot of money to be made officiating, but because of my coaching, I am limited to spring and summer. Next spring I may get back into soccer and start working the club circuits. $150 weekends are to be made for the entire season if I get in touch with the right people and they know I am quality.
- Planning New Courses: This summer I will be planning and designing two new courses for our school. This should result in approval for the full amount of the summer course development grant our school offers. Add $500 to my summer income!
Prior to setting these goals, I kept track of and categorized all my spending. The categories are a bit liquid – my “Entertainment” and “Eating Out – Social” are categories that are almost synonymous. There isn’t a “Miscellaneous” category, which there should be and will be from now on. Things like “car wash” will go in there. You might notice that there’s no monthly haircut – I cut my own. I’m fortunate enough to have no car payment, as well. Really, my expenses are already pretty lean. If I am not purchasing clothes or going to the movies, just about every other dollar I spend is on food or drinks. That’s where I’ll set aim to obliterate needless spending. I won’t run it down in this introductory post, but I was able to chisel out $210 in spending that I think I can cut. This will go towards making that “$621.64” in March “$801.64” in April.
Expenses on the Horizon
- Softball Fee: Though it’s not official yet, the softball team I’ll be playing on should cost me $100. This is one of those things that is an expense, but one I am not willing to cut. This will probably hit me before my next paycheck.
- Denver Trip: One of my best friends is getting married on July 4. I’m in the wedding and will be heading to Denver for 4 days, 5 nights. The plane ticket has been purchased and I have a roommate for 3 of those nights. Another one of those nights I should have free lodging. I’m looking at $180 for the hotel and probably $175 to rent a car. After that, expenses will be food and drinks, which can/will be substantial. I am hoping some others will go in on the car rental and after that I will try to offset expensive meals (liquid or otherwise) at night with cheap/free food in the morning. Still, I’ll anticipate $50 a day for a total of $605. I think that’s a safe overestimate. About $175 will come from my CapOne cash rewards being cashed in. Another $100 from a first three-months bonus on my Chase Card (my only other credit card). I’ll cash in my Chase rewards as well, but those will be smaller (maybe $25) and I’ll take my piggy bank to the big bank (another $50?). Therefore, I should have about $350 to put into the Denver trip that won’t come out of my normal monthly budget. Given my overestimate, I’m optimistic the trip won’t break the bank.
- New Phone: I cracked my iPhone. It still works fine and I’m tempted to just completely put it off and not pay $200 for an upgrade. However, I need to check out the trade-in value. Despite the cracked screen, I might be able to get $75 for it – which is $75 more if I keep it until it dies and then pay the $200 I will eventually have to pay. At any rate, I’ll try to wait until after the Denver trip.
- I am Moving in June: To an apartment that will cost an extra $200 a month. This cost increase is pretty much covered by my salary increase and the addition obligation I am adding at work. However, there will be moving costs and I think a small increase in security deposit. $250 is already put into that from when I signed a pre-lease, so I expect the damage to be minimal.
- New Computer: This is especially long-term. I have no intention of buying a new computer, however the one I have is now approaching its fourth birthday, which makes me worry. I’ve kept it in good shape, though. Hopefully it has another 4 years in it.
- New Glasses: I almost pulled the trigger last summer, but didn’t. At some point I’d like to buy a new pair of glasses. I wear my contacts a lot and already wear them several times the recommended period of time. A new pair of glasses I’m cool with wearing a little more routinely will lessen my contacts costs in addition to being less craptastic than my current glasses. This one also won’t happen any time soon, but possibly before the computer.
Excitement Level: Optimal
I am very aware that my goal is overly ambitious without changing one major thing: living in downtown Ann Arbor. My soon-to-be $900 rent should be the first place I am looking to cut costs and if I wanted I could find a place for $400 cheaper with the same commute to work. However, I am not willing to sacrifice my remaining 20’s to this loan. I moved back to Ann Arbor so that I could live in a city again, even if it is a small one. Plus, despite the increase in rent, I will no longer have to worry about taxis or parking downtown. I’m just a 20 minute walk to the edge of downtown – or a 5 minute bike ride.
A roommate, while something I would welcome greatly, is a tricky situation thanks to my current four-legged shedding roommate. Therefore, it’s all about frugality and holding myself to my goals. And that’s what this blog is for: a little encouragement and sense of responsibility to something other than myself can go a far way, I believe. We’ll have to wait and see just how crazy optimistic I am.