Before FIRE there was Debt
The Kiwi and Keweenaw debt payoff story. How these Millennials paid off over $50,000 in student loan and medical debt and then used their debt payoff experience to save towards financial independence and early retirement.
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In 2010 the reality of the debt my husband and I had taken on to complete our undergraduate degrees became a reality. We were not yet engaged/married, but had been dating for four years, blended our finances, and moved in together. We also still didn’t understand money, but we were quite frugal.
Our debt helped us get our money under control and ultimately discover financial independence/early retirement (FIRE).
After the excitement of moving in together and filling our place with second hand furniture, cookware, and dogs. We added up our debt and realized had accumulated over $50,000 of debt in our first five years of adulthood, which took the next five years to payoff.
You can read all about our debt payoff story here. And, in case you don’t want to read all the details, here’s the rough breakdown of all of our debt:
- $51,000 student loan debt
- $4,500 medical bills
- Fortunately, our debt was almost evenly divided, and we blended our money as soon as we moved in together. I would not necessarily recommend blending your money so early, but it worked for us. I enjoy dealing with financials, while Mr. Kiwi avoids all things money (including spending it).
We lived frugally, car-free, and managed to save 50% of our income as grad students, which we planned to use towards a down payment on a house. Silly us, we were super focused on the American dream, owning four walls, and a yard of our own. Even though we had a super cheap rental situation, half the cost of the mortgage we eventually decided to take on.
In 2010, we discussed and decided to accelerate our debt repayment, and in five years we paid off this expected and unexpected debt while paying for a wedding, buying two cars, buying a house with 20% down, and saving (not yet towards FIRE) using tax advantaged retirement accounts.
Debt and Friendships
And, while it may be a little unorthodox, we’re pretty open with friends and family about our FIRE journey. And we definitely didn’t hide our frugal ways during debt payoff. Being honest about our finances helped improve our relationships and led to us getting FREE housing for six months.
This also helped quell the push to extend our budget and travel extravagantly. I’m a sucker for a good trip, and visited eleven countries during undergrad and grad school. But I slowed down my travel while paying off debt, and mostly stayed in the US and Canada to save some money and maximize my limited vacation time. This meant saying no to joining a few friends on international trips, but has led to my friends developing some affordable travel traditions, including:
- An annual winter wine weekend
- At least 2 weekends/summer at a northern Michigan cottage
When you add on the inevitable wedding or two every year we get lots of quality time with friends to keep our relationships strong, while sticking to our financial goals.
I was amazed by how supportive the people in our lives were to help us find ways to save money. We are open about our values and goals (i.e. to live debt free) and people overall responded positively. Overcoming the taboo of talking money is tough, but helped us bond with our support system.
While paying off the debt we contributed to meet the company match of our 401k plans when available. Plus, we kept an emergency fund of $1,000, and put all of our remaining money towards paying off our debt. We figured you can’t spend money you don’t have.
Debt and Early Retirement
By developing a better understanding of money and setting up boundaries, we were learning the basic skills needed to save over 50% of our income and save towards FIRE (which doesn’t require saving at that crazy high of a savings rate).
Paying off our debt together bonded us as a pack. We had many financial conversations that led to us choosing to accelerate our debt repayment. And achieving a goal of paying off our debt years ahead of schedule made FIRE seem more achievable.
Sometimes I’m grateful for the debt we took on, since it pushed us to set goals in our early twenties. We value the flexibility having money can provide, especially as we continue to cope with chronic pain and the medical needs that come with it.
We finished paying off our medical, student, and car loan debt in early 2015 and have shifted our debt repayments to savings. Now, we spend money on our values, but still avoid lifestyle inflation. We were saving ~75% of our income, which helps give us options. Those options enabled Mr. Kiwi to go back to grad school.
And as we get closer to achieving true FIRE, that flame is changing. Our definition of early retirement is a lot more flexible, and it more about achieving a life we both love. And being flexible means we get to take the scenic path to financial independence, which will include more opportunities to fail (safely), but hopefully end up with a better quality of life.
Learning the financial skills to focus and pay off our debt has helped show us grace and embrace that’s there’s no perfect way to achieve FIRE.
What’s your scenic path to financial independence look like?