On May 19, 2009 I walked across the stage at The Wang Theater in Boston feeling cautiously optimistic about the future. I shook some important hands and collected my degree from Emerson College. I knew I had student loans. I knew that 2009 was one of the worst years to graduate from college in decades. I also knew I was putting off reality for another couple years by going to graduate school. Fortunately, through a graduate assistantship I didn’t need to take out any more loans. My plan was to continue my education and let the country rebound a bit more from the Great Recession. I’d worry about my debt in a couple of years. Of course those couple of years flew by faster than I could’ve ever anticipated and in 2011, the student loan bills came due. Unfortunately, I was even more unsure of the future than before, but now I had a hefty monthly payment and it was time to come to terms with the deep hole I had now found myself in.
This time period I now refer to half-jokingly as my quarter-life crisis. It may or may not have included falling face first out of a cab, a few failed romantic relationships, and wholly unsatisfying jobs. Still, I decided not to quit and consider myself a total failure at the ripe old age of twenty-four. Instead, I chose to focus on aggressively paying down the debt and getting my net worth back up to zero as quickly as I could. This required an extreme level of sacrifice that I generally don’t recommend to folks, but it did allow me to pay off my loans in eight years. The most frequent question asked of me now is “how did you do it? How did you pay off six-figures in debt in 8 years?” The answer is fairly simple - I made a plan and I stuck to it. But that’s not helpful is it? I also learned some valuable lessons (good and bad) along the way that I’d like to share.
Before I really began my debt payoff journey I learned about the types of repayment methods I could choose from. The two most common are the snowball and avalanche. I chose the snowball repayment method. I chose this method based on what would work best with my personal psychology. Did it cost me more in interest? Yes, it did. Did it give me motivational wins early on and helped me stay committed? Also, yes. The latter was more important to me than the former.
Second, I cut my spending to live as minimally as possible so I could throw every extra dollar at the debt. I became borderline obsessive about not spending money. I won’t lie to you, it was miserable. I wasn’t just frugal, I became cheap. I do not recommend this. I feel like I missed out on a lot of fun and memories in my twenties because I was obsessive about paying down my student loans. I could’ve achieved a bit more of a balance in my life had I realized this earlier. Life is short and precious afterall. On the other hand, if I had made smarter choices with student loans to begin with I wouldn’t have been in such a big mess.
Lastly, I stuck with the program until I was completely out of debt. It was a painful journey but I learned a lot along the way and it really was a catalyst for my current career helping others with their money. So what would I have done differently? There are only two things that really stick out. I would’ve automated my student loan payments. Automation would’ve provided a lot more clarity, organization, and headspace. I think it would’ve lessened my obsessiveness while ensuring I always remained on track. It also would’ve helped me understand my spending better. I felt like I was always guessing as to how much I could comfortably spend on fixed and discretionary items, so just to be safe I spent next to nothing. Secondly, I would have worked on my money mindset earlier so as not to let my entire life be consumed by my debt. Automations are a great financial tool when you’re working through improving your relationship with money. What makes me so strong in my convictions regarding these learnings? I’ve not only gone through the debt journey myself, but I’ve helped dozens of other people as well. The psychological challenges of staying motivated yet balanced during this journey are fairly ubiquitous. It’s still all just anecdotes, but from my experience as the debtor to that of the debt coach I know automations can help tremendously.
So now, as someone who has successfully climbed out of debt, I’m here to teach you a different and better way to pay down those pesky loans by using automations and better money mindset techniques. Because when you know better, you do better. For those graduating from college a decade or two later than I, or for anyone struggling to get out of debt, I highly recommend using the technological advances of artificial intelligence and automations to aid you on your debt journey.
Before you start your debt repayment journey, we need to fully understand the root causes of our debt. For some of you this may be as simple as “I took out student loans to pay for my college education.” For others, it may be more complicated. There may be significant underlying issues and problematic behaviors which need to be addressed. Often debt is a symptom of a great issue - trauma, a deeply ingrained belief system, a coping mechanism. If you are someone with a more complicated reason for getting into debt, or perhaps you’ve never examined it at all, now is the time. Ultimately, you won’t be able to avoid costly debt in the future if you don’t understand how you got to where you are now. There are a few simple steps you can take to understand your debt.
First, you need to know what kinds of debt you currently have. You need to understand who you owe money to, how much you owe each month, how much you owe in total, the interest rate on each loan, and the repayment options (particularly with Federal student loans you may qualify for various types of repayment plans). Once you have your full list of debts you can continue the audit.
The next step is to examine how and why you’ve accrued this debt. Again, this could be as simple as paying for school. Or perhaps you didn’t have an emergency fund in place when disaster struck (medical issue, car or home repair, etc.). Or perhaps spending money in various ways is a coping mechanism and symptom of a larger root issue. It’s important to recognize the root cause of the debt no matter what it is because this is the first step in remedying the situation and putting safeguards in place to prevent the same things from happening in the future.
Now that we’ve examined our debt and the reasons for it existing, we can begin to put together a plan that’ll get us out but also prevent us from falling back in down the road. There are two popularized methods for paying down debt - the snowball and the avalanche. With the snowball method, you’re simply going to list all of your debts from smallest balance to largest. With the avalanche, you’ll list all of your debts from the highest interest rate to the lowest. Once you’ve completed your list, choose your method based on what will work best for you psychologically. If you’d benefit more from quick wins and increasing momentum, the snowball method may work best for you. If you’re focused on saving on interest and won’t need help staying motivated, go with the avalanche. The number one problem I see with folks trying to get out of debt is not addressing what you’ve read in these last two paragraphs - knowing the how and why of your debt and creating and sticking to a plan to get out of it.
There is a third debt repayment method available to you as well. I like to call it the “emotional baggage” method. Let’s say you have one debt, credit card, or loan that keeps you up at night more than the others. Maybe one credit card brings back a lot of bad memories and is triggering. Focus on paying that card down first! Get rid of the emotional baggage as quickly as you can and then move to the avalanche or snowball methods. There’s nothing wrong with this method and frankly it might help you stay on track.
When paying down your debt, pay all the monthly minimums except for either the lowest balance or highest interest rate debt (depending on which method you’ve chosen). Now you need to work on your cash flow to free up as many extra dollars as you possibly can and aggressively pay off that first debt (minimum payment plus extra money). Repeat this process until you pay off the first debt. Cross it off your list, move down to the next lowest balance or highest interest rate, and repeat the process over and over until you’ve paid off everything. During the process, try to pay for as much as you can with cash so as not to accrue more debt. Work on your money mindset and cut as many expenses during the process as you can to speed up the process. Any raises or bonuses received during the process should also be at least partially allocated to the debt repayment. If this all seems like a lot of steps and you’re nervous you won’t be able to reliably stick with it - well, I have a solution for you.
Automate your debt repayment. What is automation you ask? Automation refers to the process of making payments to your creditors and bill collectors automatically - without you manually having to enter in your payment information every single time. Traditionally-automated systems have a few drawbacks though. First, it requires you to log into your financial institutions and actually create the automation from one account to another. These automations tend to also be inflexible in that each transfer is for a set date and a set amount of money. These automations do not take into consideration any fluctuations within your finances. Lastly, the transfers will continue running whether you want them to or not, unless you specifically go in and cancel the automation.
We deeply understand these issues at Parthean and we’ve aimed to solve these problems and make automations smart. First, we’ve created an app where you can automate your financial life and pay off your debts all from one place. This solves that first issue of logging into each and every financial institution separately to create your automated system. This streamlined approach makes the process of setting up automation fast, easy, and reliable. Secondly, Parthean will alert you before an automated transfer or payment happens and all you need to do is click a button to approve. It is so simple, you won’t think more than five seconds about doing the right thing with your finances. We understand that humans have more than 35,000 decisions to make per day. This leads to “activation fatigue” and procrastination. We know what we need to do with our money, but the tedious process of setting up automatic payments stands in our way. If there’s a change in your financial situation, your automation can be edited easily within the app. Parthean allows you to create a completely automated financial system but leave you in total control.
There are many benefits to automating your finances. Getting out of our own way is the first and most important among them. The more we realize we humans are all flawed and prone to making occasional poor decisions, the quicker we can set up safeguards against our own worst instincts. Automating your money means not spending it foolishly elsewhere and ensuring your consistent progress. I drive this point home to my clients, automating means doing the right thing without having to think about it. Automating also has lesser known advantages like freeing up brain space. When we know our financial decisions are already taken care of, we don’t have to spend so much time worrying and fretting about them!
Automation is a great tool when you’re working on improving your relationship with money. It helps bring simplicity, clarity, and predictability to your financial situation. It provides an easy way to calculate when we will hit our financial goals. It forces us to correct bad habits. When we automate our bill paying, saving and investing - the money leftover is then available for us to spend truly guilt free. We know exactly how much we can afford to spend.
If you are in debt, I highly recommend automating your debt payments. Again, if you are using the snowball or avalanche methods, you can automate the minimum payments on all but the one debt you are focusing on. For this particular debt, you can rearrange your cash flow to find an amount to pay each month that is aggressive and more than the minimum. When you find this number, automate the payment. This system allows you to avoid the mistake I made when paying down my debt - which is becoming overly obsessed with it. When it’s automated you can limit the amount of time you waste thinking about it. Instead, you’re free to go live your life and have a greater understanding of how much you can spend freely.
To increase the speed at which you get out of debt, I also recommend putting at least a portion, if not all, of your raises or bonuses into paying down debt. Increase that automated monthly payment and you’ll find yourself debt free significantly faster. This will help you avoid what we now call “lifestyle creep” or what used to be referred to as “keeping up with the Joneses”.
While you’re paying down debt, it’s critical to continue to examine and evaluate the reasons you are in debt in the first place. During your debt repayment journey I want you to ask yourself the following questions and be thoughtful and honest with yourself:
Don’t be afraid to write your answers out. The act of writing or typing your thoughts on these questions will provide a tremendous sense of clarity and understanding. As you continue paying down your debt and spending in your everyday life I want you to monitor your feelings around money each and every time you interact with it (making a purchase, moving it from one account to another, etc.) What do you notice? Are there any particular emotions coming up for you? These simple questions may not solve any lingering traumas, but they will help you to know yourself better and assist you in making positive financial changes going forward.
Paying off debt is not an easy task. It often involves taking a good hard look at ourselves and the way we manage money. It also takes discipline and sustained momentum. The best thing we can do to ensure our success is to automate our debt repayment method. Don’t let yourself get in the way of your future success. There are so many benefits to automating your finances and with Parthean it now only takes a few minutes to get going down the right path. Once your automated system is set up, I know you’ll have greater emotional bandwidth for your money and you’ll have limited your ability to self-sabotage. Your future self will most assuredly thank you - take it from someone who paid off $107,000 the hard way.
