CEE Standard: Saving
Kara Perez’ story of getting out of debt is an inspiring one that might help your students better understand the difficulties student loans can bring. Start a discussion about whether or not your students should be willing to give up other things to pay off their debt.
I, like millions of other Americans, graduated college with a heavy load of student loans.
I graduated with $25,302 in debt, no savings, and no job. It was just me and my English degree out there in the middle of the recession.
My post-college professional life has been bumpy. I’ve never held a full-time job, and I’ve worked in the foodservice industry in some way ever since graduation. My grandma definitely thinks that I’m wasting my education. In the year after I graduated, I made $15,000 total.
Last year was the first time my income level broke into the $30,000 range. I brought home $32,000 before taxes and felt like a baller for it. Today, I’m debt-free, with $12,000 in my retirement accounts. I’m a full-time freelance writer now, and I’ll probably make around $30,000 again this year.
How Did I Do It?
But I paid off all my debt and started socking away money into my retirement funds in the last three years. I pulled that off while being pretty broke, and I’m here to tell you how.
Paying down debt and saving money are two sides of the same coin. They both require one thing: focus. Three years ago, I was 25, and feeling terrible about myself. I was underemployed, working as a part-time caterer and a part-time gym receptionist. Plus, I was buried under a pile of student loans. I felt lost, and it freaked me out.
As difficult as that time was, it gave me the focus I needed. I realized my low income and high debt was the root of my stress. I was financially insecure, and it sucked. So I lasered in on paying off my student loans as the way I was going to become happier — and it worked!
I cut out absolutely everything that wasn’t a basic need. Literally, everything except rent, insurance, and gas was cut from my spending. The obvious ones: eating out, drinking, clothes shopping, and vacations. The not so obvious ones: grocery shopping (I lived off catering leftovers), buying Christmas gifts, and makeup. Plus I walked or cycled more to use less gas. I took on more part-time work and doubled my income. As a result, I paid off my final $20,000 in loans in 14 months and then transitioned the money that was for my debt payment to my retirement accounts.
The Joy of Being Debt-Free
As my debt disappeared, so too did my stress. I felt less anxious and much happier than when I was drowning in loan payments.
In the last two years, I’ve maxed out my IRA and started a solo 401(k). I simply shifted my focus and kept all my debt payoff tactics in place. I still don’t eat out often, and I still bike instead of driving whenever possible.
Building my savings, including my retirement accounts, is my top priority right now. Compound interest benefits you more the earlier you start saving! In the next five years, I plan to put an additional $45,000 into my retirement accounts. By the time I’m 45, I’d love to be financially independent. It’s worth it to me right now to make those trade-offs.
Why does retirement matter so much to me? I’m 28 years old. It’s literally decades before I plan to retire. That’s exactly why it matters. Kara at 68 will still be Kara. What I do today affects me in 40 years. I want to be comfortable in my golden years, and saving today helps to ensure that.
I also come from a place of financial insecurity. That’s a scary, stressful place. I don’t want to have to worry about how I’ll pay rent in the future. Building up my personal and retirement savings right now puts more distance between me and financial insecurity and towards an abundance mindset.
Get Ready to Save for Retirement
Feeling ready to jump-start your retirement savings? Each year, single people can save $6,000 into their IRAs. Other retirement options are 401(k) accounts, in which the maximum annual contribution amount (for those under 50) is $19,500. If you’re over 50, the limit is $26,000.
Focus is all that it takes to see amazing changes in your life. There may be bumps, and your road may not look exactly like mine. But stay focused, and you will move mountains.
- Do you plan to attend college?
- Will you need to take out student loans in order to be able to go?
- Do you think you could cut out all other expenses to pay off your debt faster?
- Would you be willing to be as frugal as Kara was in order to be debt-free?
- What can you do to reduce the amount of debt you take out in the first place?
