I graduated college in 2005 with a diploma, my 193,845-mile Chevy Cavalier, $2,000 in the bank, and approximately $36,000 in student debt. The $2,000 was saved from four years of working at a minimum wage job, two years of Saturday morning Amish market runs, various summer jobs, and graduation party gifts.
Fast forward almost six years, and Paul and I are out of debt and have a positive net worth. Just how did I get from Point A to Point B?
Living Like a College Student on a Salary
Two weeks after graduating college I started work as an International Sales and Marketing Specialist at $40,000 a year. The job was in my college town, and perhaps that is why it was so easy for me to continue to live as a college student. I found a roommate who was in her senior year at college. Her parents were renting her an apartment in town instead of living on campus. My share of the rent was just $350 per month, and because the roommate’s parents were on the lease, no one asked me for a deposit. Also, since my roommate was still in college, I got the apartment to myself for summer months and winter break. It was the perfect set up!
Living expenses were extremely cheap; I had been ultra frugal my entire life and really did not know how to spend the huge amounts of money I was now raking in every two weeks. For that entire first year out of college, I had a real routine down:
- Gas: Once a month I filled up my gas tank (I lived just two blocks away from where I worked).
- Laundry: I washed my clothes at the Laundromat. Once a week it was two loads of wash, and then when I changed them over to the dryer.
- Food: I would go grocery shopping just two stores down from the laundromat. My grocery spending consisted of approximately $75 the first and third weeks of the month, and $25 the second and fourth weeks in the month. By the time I was finished shopping from my list my laundry was finished. I then folded, loaded up my car, and drove the three minutes home.
- Other Costs: Since I was living with a roommate, I only paid half of the internet, cable, and electric bills.
- Furniture: As with any apartment or home, we needed furniture. Once again I was extremely fortunate because my roommate was more than glad to furnish the shared areas of the apartment with IKEA furniture (I think her parents paid for everything). I traded my desktop computer for a nearly new full sized mattress and box spring from my sister. I also brought several items from home: my boom box (still have!), a small television and VCR from my high school days, tons of books, a few plants, my clothes, a bedside table, my bicycle, a gorgeous painting Paul had bought me while in South Korea (now above our fireplace!), etc. Everything was complete when we found a futon that was being given away for free outside of a posh home in Washington D.C.
Spent Very Little
I lived in a small town on the shores of the Chester River. Aside from a cute farmer’s market, a niche bookstore, a craft store, grocery store, Laundromat, movie theater, bowling alley, etc., there was really nowhere to spend money. The closest “mall” was a cluster of outlet stores about 40 minutes away. This, on top of the fact that I don’t have a huge appetite for things, meant that I did not purchase very much. I can remember clearly some of my “large” expenditures that first year out of college: I purchased two curtain rods (now in our guest room) and two green silk curtains from Bed, Bath, and Beyond, a juicer, an iron coat rack (still have in our house), an iron planter (still have, but currently not using), a $99 Down Comforter (on our bed, along with the duvet cover I originally purchased), a dresser from IKEA (sagged under the weight of my clothes), a $20 desk from the local dollar store, some clothes from Old Navy, a desk chair, and a brand new Alpine CD player for my car.
Stashed the Surplus Money
For the first four months of my salaried paycheck, I was living without a budget, without a savings account, without a retirement account, and just kind of taking it all in. After a few months, I noticed that my checking account had swelled to a little over $4,000. It’s not that I had a plan and was saving a certain amount of money each month; in fact, I had no budget at all. This was left over naturally from a nice income coupled with my frugal living. But I knew that I needed to work a plan out and give my money some purpose.
I opened up an IRA account with Vanguard and stuck $2,000 in there. I also set up an automatic monthly withdraw into this IRA account. Then I opened up an ING Savings Account and set up automatic withdrawals from my checking into my savings account.
At around the same time, I began receiving lots of credit card offers. I knew that I needed to work on building a credit history (though I suspected that my student loans counted towards this). I signed on with Citibank, which gave me a $100 gift card to bed, bath and beyond. With the gift card I purchased a three-drawer wicker stand (now in my office). I gave myself a budget of $400 per month for gas, groceries, travel, and anything else I wanted to spend. My budget was spent on this card and then I religiously paid off the balance each month.
Student Loan Debt Reality
Finally, it was time for me to tackle my student loans. I took a look at all of my paperwork: I had a private student loan for $6,000, and the other loans were subsidized through the federal government. It just so happened that this was the time when the consolidation rate for student loans was amazing. However, after researching consolidations, I found that if I put my $6,000 private student loan with an interest rate of 9% in with my other student loans which had interest rates of between 2-6%, then it would raise the interest rate on the whole bundle. Therefore, I consolidated all of my loans at an unbelievable 2.25% interest rate, and left the $6,000 loan out of the bundle.
The $6,000 loan I decided I would pay down extra fast.
In A Good Position…Just in Time for a Lay Off
By the morning of June 6th, 2007 when I was pulled into my boss’s office and told that I was being let go, I had a savings account with $10,000, an IRA account with several thousand dollars, and one year of experience under my belt.
To be continued…
Save Beyond Your Means Series: