From a Pile of Debt to Net Worth: Part I

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:

Save Beyond Your Means Series Introduction
From a Pile of Debt to Net Worth Part I
From a Pile of Debt to Net Worth Part II
From a Pile of Debt to Net Worth Part III

 

10 comments… add one

  • Hi there,

    I looked over your blog and it looks really good. Do you ever do link exchanges on your blog roll? If you do, I’d like to exchange links with you.

    Let me know if you’re interested.

    Thanks..

  • What an inspirational story! I can’t wait to read more. You made some excellent decisions.

    My husband will soon be finishing his Ph.D. with $25,000 student loan debt, and we plan to pay it off quickly too. Thanks for the motivating story!
    Melissa recently posted..The Saved Quarter Challenge 6- No Progress!

  • Jenna

    Sounds like a great post-college first year. Minus the loosing your job part. Hope your next blog post talks more about your career opportunities.

  • I agree with this way of living. I do the same. It took me a while though to learn it. It eliminates so much stress, and really it’s just a mental habit, to be comfortable with what you have and not try to obtain more of everything. Hope you can keep it up. Have found lots of pressure in my life from people who don’t agree, but they are also very stressed.

  • Looking forward to the remaining part of the series. Your move setting up automatic withdrawal really paid off in time for the job loss!

  • Cary B. Randall

    …..Many students choose to begin their careers at community college before transferring to a four-year institution.Considering that the University of California Regents reported that approximately 30 of all the UC awarded bachelors degrees were given to students who transferred from community colleges you are not alone…The time that you take to plan out your community college curriculum will pay off significantly in helping you gain acceptance into the university of your choice along with transferring valuable credits.The key to successfully transferring to a four year institution begins with early planning.This ensures that your credits not only transfer but that the classes you take put in the best academic light possible…Step 1 Befriend your academic counselor ..One of the least utilized resources is your academic counselor whose goal is to help you succeedacademically! One of the first things you should do during your transfer planning is to meet with your academic counselor as soon as possible.Tell your counselor what your plans and goals are and together you can craft a curriculum that not only helps you gain entry into a four-year institution but will also allow you to transfer the maximum number of credits.You should ideally meet with your academic counselor before your first semester at community college ensuring that your curriculum planning is optimal to your long-term goals.Schedule quarterly or semester meetings with your counselor and the transfer rewards will pay off significantly…Step 2 Evaluate what four-year institution and major you want to attend ..Not all institutions are created equal and neither are their transfer requirements.You should develop a list of institutions are you are interested in transferring into and then evaluate their transfer requirements.Each institution has a different set of governing rules when it comes to applications from community college students.For example if you are interested in attending the University of Virginia as a transfer student you will be expected to hold a minimum 3.4 GPA and not all programs are open for transfer students.On the other hand the University of California system requires a minimum 2.4 GPA and they do not have any limitations on the majors programs or departments for transfer students…Understanding what your ideal four-year institution expects of its transfer students can help you craft your time at community college accordingly.You can conduct research ahead of time to properly assess their requirements minimums and expectations which will help you make the best curriculum choices in community college…Step 3 Understand what the transfer program entails ..Most transfer programs anticipate that you will complete your first two years at community college then transferring to a four-year institution as a junior.Therefore your two years at community college are typically spent building your lower-division course credits such as .. Classes that are related to your major You should also take classes that will prepare you for your major once you transfer to a four-year institution.This not only cements your interest in your major but also demonstrates to the university that you are serious about your interests as well as have an ability to succeed in the subject matter…Remember as a transfer you essentially have two main goals demonstrate that you are academically competitive in your major and ensure that you can transfer over a maximum number of credits.Both of these are important in not only helping you gain acceptance into the university of your choice but also in graduating on time from that four-year institution…Step 4 Review articulation agreements between four-year institutions and your community college ..Articulation agreements are important in your transfer plan because they define the detailed policies that govern your transfer from a community college to the four-year institution.Your community college most likely has specific articulation agreements with both the public and private universities in your state…What does an articulation agreement entail?It essentially discusses what classes are required of the proposed transfer students and which courses from the community college will transfer with full credit to the four-year institution.Whereas some articulation agreements are broad governing the entire community college and four-year institution relationship others are more specific.For example for a community college student interested in pharmacy there may be an articulation agreement between the pharmacy departments of the four-year institution and the community college.On the other hand other articulation agreements offer broad guaranteed admission.The University of California for example has articulation agreements that guarantee admission of community college transfers as long as they meet minimum academic requirements…It is important to stay updated on the changes to the articulation agreements as they can vary between quarters and semesters.It is highly advised that you speak to your counselor to obtain these updated articulation agreements and you may be able to find the information online.For example if you are attending a community college in California and considering transferring to a UC institution then specifically helps you determine which of your classes will transfer to UC credits…The key to successfully transferring from a community college to a four-year institution is planning!The earlier you plan and the more you empower yourself with knowledge regarding the transfer and credits process the more likely you will gain admissions to the university of your choice and have all of your classes obtain maximum credits too…..

  • I can’t wait to read the rest of your story! I also have college debt and am looking forward to paying it off quickly!
    Ashley recently posted..Baby Brain

  • Excellent habits. If you keep them up, your financial life will continue to go well. And you can end up getting the most from your paycheck. This is also a very nice primer for the new college grad. I’m definitely going to promote this article!
    Barb Friedberg recently posted..WHY YOU MUST START SAVING NOW!

  • Great story so far! I wish I could pay just 350 for rent but I don’t think I could handle having a roommate lol

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