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These days, it is common to graduate with student loan debt.
Among the students of the 2018 graduating class, 69 percent took out school loans with an average balance of $29,800. I graduated from college more than a decade ago, but my results were very similar.
When I walked across the graduation stage to receive my diploma, I could almost picture the tumbleweeds blowing through my bank account. On top of that, I was now the proud owner of a $26,000 student loan balance – plus the $4,000 I owed on my credit card. To say that I was financially unprepared for the real world would be an understatement.
With my shiny new degree in hand, I packed up my belongings and moved back into my parents’ house. Buoyed by the knowledge that I wouldn’t need to start paying back my loans for another six months, I began my job search.
I was eager to find a job in my field, and was pretty sure that everything would work out just fine for me. I hadn’t told my parents about my credit card debt, but I was able to scrape together just enough to cover the monthly minimum payment.
My parents had always taught me to be responsible with credit cards, and had given me one in high school so that I could build my credit. They gave me a spending limit and paid off the balance for me every month. But that lesson in responsibility obviously went in one ear and out the other.
Good Judgement Comes from Experience
There’s a saying that goes, “Good judgment comes from experience; experience comes from poor judgment.” While some people can learn from others’ mistakes, I seem to learn best by doing things the hard way.
I was 16 when I got my first job, and I bought my first car shortly after that. My newfound freedom was intoxicating. Like most teenagers, I felt like having my own set of wheels and a little spending money meant that the world was mine for the taking.
I’m a spender by nature. Thanks to new clothes and shoes, and evenings out with friends, my money left as soon as it hit my bank account. Since I pretty much always had a job after turning 16, my spending wasn’t much of an issue. At first.
Although I was spending money in my late teens, my purchases were always limited by my paycheck. I put little thought into saving or investing my income. Money was meant to be enjoyed, and I tried my best to do just that.
When it was time to apply for college, I ignored the more affordable in-state schools in favor of options that would take me to new places. Although attending an out-of-state university meant a greater financial burden for both my parents and me, taking on student loan debt felt like the norm. In my mind, I would graduate with a four-year degree, get a job, and pay off my debt just like everyone else.
Hitting Rock Bottom
When all was said and done, my portion of my college bill was a little more than $26,000. This was in addition to the loans that my parents had covered to fund my education. And I had also managed to rack up that $4,000 credit card debt.
For the first few post-college months, I was able to cover the minimum payments on my credit card bill with whatever money I had left in my bank account. But I couldn’t sustain that practice without an income. At that point, I wasn’t even thinking about my student loan debt, since I didn’t have to start repayment until the following January.
Even though I applied to open positions and sent out resumes on a daily basis, I wasn’t having any luck with my job search. While living at home was free, I didn’t have any spending money. I was just trying my hardest to keep my parents in the dark about my credit card debt.
When the next credit card statement came in the mail, I realized that there was no way I could afford the minimum payment. I finally had to face reality: I would have to ask my parents to bail me out.
After my panic faded, I got up the courage to explain the situation to my mother. It was one of the hardest conversations I have ever had with her, and was a turning point in my personal finance journey.
Learning About Debt the Hard Way
My mother wasn’t happy about my debt, but she agreed to help me out – on the condition that I find a job as soon as possible. She wanted me to pay off my debt as quickly as I could, and to use my money troubles as a learning experience.
We also agreed that I would pay her back as soon as I started earning money. After being on my own in college for four years, crawling back to my parents was a tough pill to swallow. But looking back, I am very glad that I learned this lesson early on.
With credit card debt hanging over my head, I found a job that was semi-related to my degree. Although I didn’t particularly like it, it paid well enough for me to make a dent in my debt. During the next few months, I threw as much money as I could at my credit card bills.
In the meantime, I began researching personal finance and learning the basics of managing my money. Even though I had my college degree in hand, I was woefully unprepared for the challenges of the real world. I scoured websites, blogs, and library books to learn as much as I could about financial responsibility.
After being forced to move back in with my parents and ask them for money, I vowed to regain my independence. My debt was just the kick in the pants I needed to take charge of my finances and never look back.
Four Lessons I Learned Graduating with $30K in Debt
Financial education is still severely lacking in both high school and college curriculums. While students learn how to solve complex math equations and write essays, most are never taught basic money skills like how to make a budget.
I was forced to change my mindset after growing up thinking that debt is normal and money is meant to be spent. This took a lot of research and hard work, but it was well worth it. Here are the lessons I learned from graduating college with $30,000 in debt.
1. Every Dollar Has Value
One of the first things I did was to look through my old credit card statements. After racking up so much debt, I wanted to see how I had spent my money and what I had to show for it.
After inspecting one credit card statement after another, I came to a shocking conclusion: I had nothing to show for all of my spending. Most of my money had gone toward drinks, eating out with friends, and clothes that I no longer wore.
This realization made me reevaluate my money and spending habits. I didn’t particularly like the job I was working, and it was a wakeup call to realize that all of my paychecks were going to my past, frivolous spending.
Pouring my entire income into paying off debt changed how I thought about money. It fueled my newfound interest in personal finance and helped me understand how to manage my money the right way.
This turning point completely changed my life. Had I not graduated with so much debt, I would probably still be living paycheck to paycheck, struggling to pay my bills. But my experience paying off my debts taught me the value of every dollar I made and saved.
2. Money is Freedom
One of the main reasons I was forced to move back home after college was a lack of funds. When I graduated, I had no money, no job, and no prospects. All I had was my degree and a significant amount of debt hanging over my head.
My parents were kind enough to let me move back home while I searched for a job, but not everyone has that option. I am deeply grateful that I had the chance to live rent-free while I figured out what to do with my life.
But after having lived on my own for four years in a different state, being back in my old bedroom was a painful and humbling experiencing. Waking up in my childhood bed was a daily reminder that I now had to answer to my parents.
The ultimate goal of paying off my debt and moving out on my own again fueled me during those long months. That freedom was a light at the end of the tunnel that motivated me as I continued sending out applications and going on interviews for jobs in my field.
After two post-college internships, I finally landed a full-time job that allowed me to move out. By this point, all of my credit card debt was finally paid off, and I was managing my student loan payments.
Learning from my past mistakes, I worked hard to build a solid cash cushion before moving out on my own. My new salary wasn’t very high, but I worked hard to keep my expenses – including rent – at less than 70 percent of my income.
One of the most important lessons you can learn as an adult is that having money means freedom and choices. A high-paying job will not provide any more freedom than a low-paying job if you choose to live an unsustainable lifestyle.
3. Having a Support System is Crucial
Although I hated moving back in with my parents or asking them for money, their support was invaluable. Without that safety net, I would never have been able to pay off my debts as quickly as I did.
If I had attempted to live on my own at that point, my rent, utilities, and food would have added thousands of additional dollars to my debt balance.
Not only did my parents provide me with room and board, they did so for free. I had taken their help for granted while I was in high school, but after moving out on my own, I was able to fully appreciate their support.
I worked a part time job all throughout college and during the summer so I could pay my bills. Even though I still wasn’t saving money, I was still learning some important life skills. That was the first time I rented an apartment on my own, paid for utilities, bought groceries, fed myself, and so on.
That experience made me appreciate my parents even more when I moved back home. While I wasn’t happy to be right back where I had started pre-college, I had a better understanding of what it would take to live on my own again.
My parents helped me get back on my feet, while offering financial as well as emotional support. Once I was making enough to get my own place, I moved out with the knowledge that I was always welcome to return. Having that safety net made the transition much easier.
4. It’s Possible to Live Well on Less
As I’ve already said, I am a natural spender. When I previously worked retail, I had joked that my employers should have paid me in store credit, since all of my money went to shopping. Despite the fact that I had a paycheck that should have been going to savings while in school, I spent all of my money – every last cent.
In my house growing up, my mother was the saver and my father was the spender. I took after my dad, with a natural inclination toward making money and spending it quickly. No matter how much I tried, I was never able to save a significant amount before giving in and spending it all.
Facing my mountain of debt without the safety net of a paycheck was a wakeup call. That was when I realized the value of spending less so I that could build cash reserves. Had I not spent my entire paycheck on clothes and food, I would have been able to set aside enough to pay my bills. Better yet, I would probably not have racked up so much credit card debt in the first place.
I learned the hard way to separate my needs and wants. Knowing that my income was limited and that I had debts to pay, I made some tough choices and skipped fun experiences with friends. Many of the things that I desperately craved were just wants. There wasn’t much that I truly needed to be happy.
The Bottom Line
Following the advice of several personal finance blogs empowered me to turn my finances around, and taught me the value of living on less and saving the difference. Thanks to those important financial lessons, I finally paid off my debt and built an emergency fund.
Now that I am debt-free, I can look back on that time in my life as a valuable learning experience. While I didn’t appreciate my struggles at the time, I can see now how those difficulties shaped my worldview for the better.
These days, I love figuring out different ways to save money and build my cash cushion. My husband and I are debt-free – including our mortgage and vehicles. The lessons that I learned early on motivated me to broaden my financial knowledge, and ultimately led me to where I am today.
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