I graduated Auburn University in 2002 with a degree in business administration. I did not even know what business administration was, and I would find out in my senior that it meant management. I had chosen this major to graduate within four years. My freshman year, I was attending Hampden-Sydney College in Virginia. I had to transfer due to poor grades, bad behavior, and my Dad had gotten sick and was moving back to Alabama, so I transferred to a school that was closer to home. When I graduated from Auburn, my student loan debt was $20,999.50. Navient had purchased this loan from the Federal government, and I was required to pay this loan back with my payments beginning in October of 2004. At the time, I had committed myself to getting out of the credit card debt I had racked up with the mentorship of my friend Bird. He taught me how to think about finances differently by reading the book Rich Dad Poor Dad by Robert Kiyosaki. I personally don’t agree with his points of view on debt however I do agree with his examination of the importance of the relationship between the balance sheet, income statement, and statement of cash flows. A bank will ask you for proof of income and a personal financial statement to determine your ability to repay. Your personal financial statement is your report card in the world of finance. Over the years my experience in cash flow analysis of businesses and individuals has validated a lot of Kiyosaki’s points of views, and I do agree that the USA is too dependent on debt. What I don’t agree on is having too much leverage.
If you must borrow then be an ultra-conservative borrower. If you can’t pay for it 100% in cash, then use 80% cash and have a 20% loan to value (LTV). It is easier to pay back $20,000 vs $80,000 obviously. I learned about finances by watching the spending habits of my parents. Unfortunately, my Mom was the saver and my Dad was the spender. What I have come to learn personally is that this quality can be found in most men and women. It’s something in our DNA. For me security is having the freedom to spend, and for Jill security is having a large amount of money set aside. It’s important to have a money dialogue all the time with your significant other. My Dad had no problem with having credit card debt, and this point of view got passed down to me. I remember getting my first credit card in college, and getting a sizeable balance on it, and having to get a job at Wal-Mart which I quit within the first week. My great aunt even gave me money to pay off some of my credit card debt. I was not good with money in college, and with Bird’s prompting I took on multiple jobs and side gigs to pay off my credit card debt. Briefly I was credit card debt free before I moved in with some friends and started the ride all over again. It was during this time that I also was unable to make the interest payments on my student loan and decided to go into voluntary forbearance. With this action, I didn’t have to pay on my student loan unfortunately, the interest was added into the balance of the loan. In 2007, I had lost my job and made the hard choice of declaring Chapter 13 bankruptcy. It is with this decision that I had to face my out-of-control spending, but I still denied I had a problem with debt and spending. In 2009, the Navient loan was repurchased and the balance at that time was $21,471.54. In bankruptcy your student loans can’t be discharged regardless of if it is 7 or 13. I picked the route of Chapter 13, because I wanted to keep my car and what little assets I did have and I was willing to pay down on the debt over the 5-year period. In 2014, I began to make payments against the loan again, but elected to switch the payment plan to an income drive repayment plan to give myself some financial relief and improve my overall cash flow. It wasn’t until 2018 that I was finally committed all the way to being debt free. (See January 31, 2018)
It’s why I am so adamant about either living a debt free lifestyle or a very conservative lifestyle with debt. Debt is dynamite with the fuse already lit. It will blow up eventually, the question is will you be holding it when it blows up? I would rather have the contentment of knowing that I owe no one vs knowing debt is robbing my income and my children’s children’s income. It’s important to know the difference between an asset and a liability because a liability can create debt which will create an expense which robs your income. To see this student loan, go from staying above $20,000 and being in my life for almost 20 years and now see the balance at $13,822.46, which is significantly below where it started, it gives me hope. This debt is a teenager and about to be in its twenties. How much have I lost because of this debt? How much have I lost because of my financial ignorance and pride? It is ok to make mistakes, but make sure you do not lie to yourself and choose to no longer make the mistake and be willing to put in the work. At the end of the month, I am reminded about how much 2021 feels like 2020 part 2 or 2020 the sequel. It’s because of the weight of this debt, and the weight of work itself. I find myself questioning my overall career path and wanting more. This self-examination is another reason for me to really want to be out of debt. Only having to worry about paying off the house and having a fully funded emergency fund gives our family so many more options. Can you see yourself student loan debt free?
If you want to learn more about the self-lending principle or if you need a financial check-up, then contact me
This month’s video is Michael Saylor’s MASTERCLASS in Cryptocurrency Investing and the Future of BITCOIN from the Tom Bilyeu YouTube channel.
“The LORD will send rain at the proper time from his rich treasury in the heavens and will bless all the work you do. You will lend to many nations, but you will never need to borrow from them.”
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A Debt Free Me