Pretend to Be a Student Until You Pay off Student Debt
‘Tis the season for fake commencement speeches and poignant advice for college grads. Steve at Think Save Retire issued a challenge to write a commencement address, and I’m tweaking mine to be more of a “coffee date message.” Because my advice isn’t eloquent or pithy, it’s purely practical.
My #1 financial message to recent grads would be: pay off your student loans. My #1 strategy for doing so would be: pretend to still be a broke college student. Lifestyle inflation is nearly inevitable after college, and that’s appropriate, but delay as much of it as possible until you slay those loans.
Hopefully you’ve landed a good job, but even if you have a great new income, you still don’t have money if you have debt. I know those new paychecks will burn a hole in your pocket, but try to think about the impact of keeping those student loans around for 10-15 years. Let me give you some perspective.
I graduated from college ten years ago. Many of my peers are married with kids, and some are still swimming in student debt. They may long to purchase a home, but cannot afford one because they graduated with mortgage-size debt. Others are struggling to afford medical bills or fertility treatments, because student debt still holds them back. And college funds for their kids will have to wait, because they still haven’t finished funding their own education.
Now, I don’t judge people for having a lot of student loans. When they were teenagers, the people they trusted most told them this was good debt. They said you had to do this to get ahead in life. But the people telling them this—parents, teachers, school advisors—went to college at a time when you could pay for tuition by working in the summer! Times have changed, and some of us were railroaded into massive debt before we were mature enough to understand the implications.
So that stinks, but it’s too late. After all, student loans are the one type of debt that can’t be forgiven through bankruptcy. Not that that’d be a great option, anyway. So what are you supposed to do?
How about, for starters, don’t take on any more debt?! No cars loans. No financed furniture or computers. No credit card debt. Definitely no mortgages! Just don’t go there, because you’re already in debt.
What are you supposed to drive? Sit on? Eat? Wear? Live in?
The same things you’ve been driving, sitting on, eating, wearing, and living in. Keep splitting the rent with roommates. Get hand-me-down furniture. Keep driving the beater. Shop thrift stores for your professional wardrobe. Pack your lunch.
My husband and I married while we were still in college, but even after graduating we declared that we wanted to keep living like college students. Not in the sense of late-night partying and living on ramen noodles, but we wanted to keep our lifestyle simple and inexpensive.
We did “upgrade” from beat-up college rental homes with many roommates, to a 1-bedroom apartment. Our little place felt like the lap of luxury, but it was actually cheaper than the combined rents we’d been paying in a college town.
I remember our newlywed grocery budget was $30/week (not adjusted for inflation). We shopped at ALDI and Save-a-lot, packed lunches, and cooked dinner at home most nights. We still sometimes got fast food or went out to dinner. For entertainment, we often invited friends over, went for long walks, or visited free community events.
We bought a new bed and a bookshelf, and that was it. All our other furniture we bought used or got for free as hand-me-downs or gifts.
None of this felt like a sacrifice; we had plenty of fun, traveled, and still bought things we didn’t really need. In fact, we splurged big time after Neil graduated and went to a Europe for a month! So it wasn’t like we 100% froze our lifestyle or refrained from all extra spending. But we were able to save up the money from my first year teachers’ salary to take this big trip.
We didn’t take our own advice perfectly. We even bought our home right before paying off the school loans. In the end it didn’t matter, because it was simply of matter of timing at that point. We were bound and determined to pay them off quickly, and we did. I’m so glad we paid them off before starting a family, so we could start college funds for our kids.
Even with major “slip-ups” in pretending to be college students, we were able to set ourselves up for a more flexible future. An overall mindset of delaying lifestyle inflation helped us make financial progress I know wouldn’t have been possible otherwise. It’s also made it easier to live on one income while I’m home with little kids.
It’s really hard to deflate your lifestyle, so keep it simple out of the gate. You had a ton of fun in college without a big budget; the same is possible now that you have an income. As you focus on your new stage of life, don’t lose sight of your real financial position. If your net worth is still negative, pretend you’re broke. Because you actually are.