7 ms·

I Went from $80,000 in Debt to a Net Worth of $200,000 in Six Years

39 points by Mz 10y ago

savanaly 10y ago
1. Get a job that pays upwards of 100k/year 2. Live below your means so you can save ~50% 3. Continue for six years 4. Boom, you're up 300k from where you started. There some minor things you can do to boost your savings like make sure to put all savings in low cost mutual funds and don't save a penny until all loans are paid off (and pay them off in order of interest rate, not in order of magnitude of the loan!) but that's the essence of it.
- maxxxxx 10y ago
  Not sure about the husband. I assume he has an income too so their family income is probably closer to 200k
  - zdean 10y ago
    "My husband is a software engineer, so he makes six figures, too" I think it's great that she paid it down, but on 225+k/year, it seems like the interesting story would be if she didn't pay it down.
    - maxxxxx 10y ago
      With that income they were actually slow in building up that amount of savings.
      - alttab 10y ago
        In the article, she said eating out was a luxury, "two to three times a week." I make great money myself and am married, and I don't even eat out that much.
- GuiA 10y ago
  5. Don't forget about taxes 100k a year will probably end up being ~65k after taxes, which means living on 32.5k a year to save 50%. For a frugal single person that's doable, beyond that it gets tricky (if you're in the kind of city where 100k and above salaries are common, you're probably paying 30k a year in rent alone). And even then, that only nets you $195k, not $300k.
  - wahern 10y ago
    By my calculation I get $74k filing single or $78k filing jointly, using a marginal rate of 9% (California) and 25% (Federal), but that's if you're married. It pays to be married. Sales tax won't substantially change things because housing is usually the biggest expense and isn't taxed. And if you're saving and being frugal you're not buying many taxable items. People tend to overestimate their tax burden. The difference between your gut figure and the actual numbers is almost 10% of income, which is a huge difference.
    - vonmoltke 10y ago
      I think your calculation ignored FICA, which is a flat 7.65%.
      - wahern 10y ago
        Excuse me while I pick the feathers out of my teeth ;)
carlob 10y ago
> Eating out was a luxury, two to three times a week. Frozen pizza was a good friend to me then. Wow I thought eating out 2-3 times a week was in the normal/high range. Maybe it's one of those US vs Europe things. Also frozen pizza is kind of an expensive meal once you have access to a kitchen.
- maxxxxx 10y ago
  In the US eating out all the time is pretty normal. It's also relatively a little bit cheaper than in most places in Europe.
  - carlob 10y ago
    I live in Italy, you can easily get a seated dinner for under 10 euros (including tax and service) if you get pizza, or a quick lunch for 5 or under. I don't think it's really a factor of cost, it's more that a lot more people know how to cook and keep a stocked kitchen.
- pm90 10y ago
  > Also frozen pizza is kind of an expensive meal once you have access to a kitchen. Correct. She mentions in passing that she doesn't cook. Which is a shame since one can easily cook very large amounts of healthy, nutritious and tasty meals very cheaply.
  - deleted 10y ago
    [deleted]
- sandworm101 10y ago
  Honestly, I don't eat out unless a client is somehow involved. They must either be at least at the table, if not covering the bill, before I bother. Anyone eating out so often either has too much money or cannot cook. (Don't talk about time. Cooking it yourself almost always takes less time than going out.)
  - 10y ago
curiousgal 10y ago
TL;DR Postdoctoral researcher at the University of Washington with $80k in student loans and a $40k salary turned Hardware engineer at a medical device company with a $105k salary.
- bbctol 10y ago
  Yeah, it seems more like a "person with a valuable degree realized industry pays better than academia" story than anything else.
- nashashmi 10y ago
  Plus, for the first time she cries at going debt free, and now has decided to avoid debt entirely, even for purchasing a house. She will be buying a house soon, without loan.
- samspenc 10y ago
  Right, with a $127k salary+bonus, plus her husband earning six figures as well, going from negative 80K to positive 200K net worth in six years means ... 280K / 6 ~= $50K in savings per year.
niftich 10y ago
Summary: person in anecdote got a new job offer and negotiated a good salary, then paid down the debt, while ostensibly leaving their lifestyle and expenses largely unchanged from before.
- merpnderp 10y ago
  So, the debt was a very good investment and this is a success story?
- alttab 10y ago
  Simply common sense, really.
hacker_9 10y ago
From someone from the UK, $100,000 seems like an enormous amount within 6 years of leaving university. Is that sort of thing even possible here?
- randomthrow123 10y ago
  Junior analyst positions at some of the London banks are paid around GBP 50k as a starting salary, so I guess if you pursue banking it's possible
- pjlegato 10y ago
  Yes, in the massive London banking industry, though these are not accessible to most. 100k USD is about 76k GBP. According to [1], entry level analyst jobs in London banks pay £50k to £55k. In subsequent years, you make substantially more than 100k USD. A first year associate makes £90k to £98k, putting them well ahead of 100k USD in year one. [1] http://news.efinancialcareers.com/uk-en/164/the-current-state-of-salaries-bank-by-bank http://news.efinancialcareers.com/uk-en/164/the-current-stat...
- deleted 10y ago
  [deleted]
- jordache 10y ago
  Yes, and this person has a phD.. I would have expected that degree to fetch even higher salary...
- rossng 10y ago
  Edit: I thought you were referring to debt, not salary. My mistake. I'll leave my post intact in case anyone finds it useful. Yes, absolutely. Fees are £9000 per year. The minimum guaranteed maintenance loan, if you take it, is £3821 per year (though you may be entitled to a larger loan depending on your family circumstances). If you're doing a four year course, this comes to 4 x £9000 + £4 x 3800 = £51200 ~= $68000. If you come from a poor background (and so your parents cannot provide financial help), you may be entitled to a maintenance loan of up to £10700 per year. Grants (money you do not have to pay back) that used to cover most of this have recently been eliminated, leaving poorer students with larger loans. Over four years, this would be £78800 (approximately $104k). Having done three-year courses, many people go on to do a one-year masters at a cost of £10-15k. On top of that, the current interest rate on the loan is 3.9% - meaning that most people will actually be in increasing debt until they earn £40-50k. The only bright spot is that you pay 9% of any earnings over £21k towards the loan (like an extra tax). If you earn less than this, you pay nothing. The debt is wiped after 30 years. As a result there is no US-style problem of graduates struggling to make repayments. However, with the government having shown itself willing to retroactively rewrite the terms of the loan, who knows what will happen.
pm90 10y ago
I don't understand the anxiety that most Americans have about paying off student debt. Correct me if I'm wrong, but isn't that interest free and structured for flexible payments? In other words, one of the best kinds of debts to have. Why not pay it down when one really does have extra, or pay it down in small amounts? Edit: I stand corrected. It seems like only a minority of students get interest-free loans.
- nickparker 10y ago
  A small minority of US student debt is interest free. Federal loans are 4.5-7%, and private can be much more than that. Some programs defer interest until graduation, and others defer until employment, but neither of those is universal by any stretch.
- maxxxxx 10y ago
  The young guys I work with have loans that aren't interest free. Some i know of are 5 percent and higher.
- mjmahone17 10y ago
  It's not interest free. However, for personal, federal loans, the interest only applies to the principal, which is (value of principal + interest) when the loan enters the repayment period (so 1 year after graduation). So the loan only compounds once, when it enters repayment. My federal loans were a mix between 4.5% and 7.9%, with the 7.9% loans making up the bulk of my total amount. Additionally, I had something like a 4% "disbursement fee" added on to my loan principal for some (maybe all?) of my loans the day that the loan hit my bank account.
- twblalock 10y ago
  For a long time, Federal student loans had an interest rate of 6.8%. That's high enough that it is probably a good idea to defer investing until you can pay them off. Some private loans have rates above 9%. The alternative, which is much easier now due to some of the fintech startups like Sofi and Commonbond, is to refinance to a lower rate. The downside is that your loans become private, so you lose various Federal loan protections such as hardship deferrals, income-based repayment plans, etc. If you have a low income relative to your monthly payments, you should probably keep the Federal loans. But if your monthly payments are easily affordable, and you have decent savings in case you lose your job, refinancing is a no-brainer. You can get as low as 3%, which is low enough that paying the minimums and investing your extra disposable income is better than paying off the loans faster.
frank_jaeger 10y ago
Is this not just a humblebrag? I really fail to see the point of this. It is really cool to read about people who find inventive ways to overcome economic obstacles. It's somewhat boring to read that someone got a high paying job, and married someone with a high paying job, and then things worked out.
- Mz 10y ago
  This is the third story I submitted today from a series called Into the Black: https://medium.com/tag/into-the-black https://medium.com/tag/into-the-black which is about people paying down debt. This is the title that grabbed the HN crowd. The others got one and zero upvotes, respectively (so far). Feel free to go read the other stuff in the series if this is not your cup of tea. I didn't think it made sense to submit the link (above) to the series as a "story" on HN. But it is hardly surprising that this is the title that would grab the HN crowd. (shrug)
  - frank_jaeger 10y ago
    It was by no means a dig at you! I'll check the others out for sure, thanks for sharing.
    - Mz 10y ago
      I didn't take it as a dig. I was bemused to see this get upvoted when the others were ignored.
- misiti3780 10y ago
  what was inventive about what she did - she lived cheaply and saved money every month
  - alttab 10y ago
    Sadly enough that is considered "advice" these days. Compare this to the girl who tried to live in SanFran as a low paying worker and got fired from her job for complaining about it. Mentality is everything.
fhood 10y ago
What is the point here? If you take a postdoc position that means that you are aiming for academia, and expect to be paid poorly. And if you have a PHD in electrical engineering you should be able to find a job that pays at least 100k with no problem. Is the surprise here that postdocs aren't paid well? Because everybody and their dog knows that.
jordache 10y ago
yawn
tardo99 10y ago
I'm sure a lot of the entrepreneur folks on here have much more impressive stories: "I made my first million at age 23" and the like.
nathanvanfleet 10y ago
In my life I was always pretty worried about money. I put myself through school, worked full time etc etc. I didn't really splurge on anything and I just sort of lived a simple life. At this point I guess I've managed to amass enough value by having a house and a job that pays better than the jobs I worked back then, and wowee I'm not under water anymore. I don't really live my life any differently. But I do have that feeling where I could spend a few grand on something that was meaningful to me and not really be all that bothered by it. But isn't that just the result of playing your cards kind of right and living long enough? It just seems like there is a certain point in your life where the math of it starts working out in your favour. Then again I guess I know people about my age who struggle a bit more...
vbtemp 10y ago
This kind of thing triggers my crazy buttons: What kind of person goes into debt to get a PhD and then becomes a postdoc? Why not just leave off with a masters or BS and go off to get a great paying job and do actual work with a livable lifestyle?
exolymph 10y ago
As someone who's not on a programmer's salary, $40k is definitely not "shit". The lack of context in how this piece was framed deeply annoyed me, so I responded: https://medium.com/@sonyaellenmann/frankly-this-was-very-frustrating-to-read-5659ec87e96e#.2ors4vctl https://medium.com/@sonyaellenmann/frankly-this-was-very-fru...
- rifung 10y ago
  In fairness, I don't think that'd get you very far in Seattle, which I assume the guy went to since he went to UW. I imagine that's part of the reason they enacted the $15 minimum wage
  - exolymph 10y ago
    I live in the Bay Area — just not San Francisco or Oakland — and the minimum I could live on is $2,000 per month (before taxes). But that comes to $24k per year, with is substantially less that $40k. Also the author was a woman, just FYI.
    - seanmcdirmid 10y ago
      My 60k CHF post doc was more than enough to live in Lausanne, which is way more expensive than SF or Seattle. I was also able to save about half since eating out was too expensive to consider.

39 points by Mz 10y ago

1. Get a job that pays upwards of 100k/year 2. Live below your means so you can save ~50% 3. Continue for six years 4. Boom, you're up 300k from where you started. There some minor things you can do to boost your savings like make sure to put all savings in low cost mutual funds and don't save a penny until all loans are paid off (and pay them off in order of interest rate, not in order of magnitude of the loan!) but that's the essence of it.

maxxxxx 10y ago
Not sure about the husband. I assume he has an income too so their family income is probably closer to 200k
- zdean 10y ago
  "My husband is a software engineer, so he makes six figures, too" I think it's great that she paid it down, but on 225+k/year, it seems like the interesting story would be if she didn't pay it down.
  - maxxxxx 10y ago
    With that income they were actually slow in building up that amount of savings.
    - alttab 10y ago
      In the article, she said eating out was a luxury, "two to three times a week." I make great money myself and am married, and I don't even eat out that much.
GuiA 10y ago
5. Don't forget about taxes 100k a year will probably end up being ~65k after taxes, which means living on 32.5k a year to save 50%. For a frugal single person that's doable, beyond that it gets tricky (if you're in the kind of city where 100k and above salaries are common, you're probably paying 30k a year in rent alone). And even then, that only nets you $195k, not $300k.
- wahern 10y ago
  By my calculation I get $74k filing single or $78k filing jointly, using a marginal rate of 9% (California) and 25% (Federal), but that's if you're married. It pays to be married. Sales tax won't substantially change things because housing is usually the biggest expense and isn't taxed. And if you're saving and being frugal you're not buying many taxable items. People tend to overestimate their tax burden. The difference between your gut figure and the actual numbers is almost 10% of income, which is a huge difference.
  - vonmoltke 10y ago
    I think your calculation ignored FICA, which is a flat 7.65%.
    - wahern 10y ago
      Excuse me while I pick the feathers out of my teeth ;)

carlob 10y ago

> Eating out was a luxury, two to three times a week. Frozen pizza was a good friend to me then. Wow I thought eating out 2-3 times a week was in the normal/high range. Maybe it's one of those US vs Europe things. Also frozen pizza is kind of an expensive meal once you have access to a kitchen.

maxxxxx 10y ago
In the US eating out all the time is pretty normal. It's also relatively a little bit cheaper than in most places in Europe.
- carlob 10y ago
  I live in Italy, you can easily get a seated dinner for under 10 euros (including tax and service) if you get pizza, or a quick lunch for 5 or under. I don't think it's really a factor of cost, it's more that a lot more people know how to cook and keep a stocked kitchen.
pm90 10y ago
> Also frozen pizza is kind of an expensive meal once you have access to a kitchen. Correct. She mentions in passing that she doesn't cook. Which is a shame since one can easily cook very large amounts of healthy, nutritious and tasty meals very cheaply.
- deleted 10y ago
  [deleted]
sandworm101 10y ago
Honestly, I don't eat out unless a client is somehow involved. They must either be at least at the table, if not covering the bill, before I bother. Anyone eating out so often either has too much money or cannot cook. (Don't talk about time. Cooking it yourself almost always takes less time than going out.)
- 10y ago

curiousgal 10y ago

TL;DR Postdoctoral researcher at the University of Washington with $80k in student loans and a $40k salary turned Hardware engineer at a medical device company with a $105k salary.

bbctol 10y ago
Yeah, it seems more like a "person with a valuable degree realized industry pays better than academia" story than anything else.
nashashmi 10y ago
Plus, for the first time she cries at going debt free, and now has decided to avoid debt entirely, even for purchasing a house. She will be buying a house soon, without loan.
samspenc 10y ago
Right, with a $127k salary+bonus, plus her husband earning six figures as well, going from negative 80K to positive 200K net worth in six years means ... 280K / 6 ~= $50K in savings per year.

niftich 10y ago

Summary: person in anecdote got a new job offer and negotiated a good salary, then paid down the debt, while ostensibly leaving their lifestyle and expenses largely unchanged from before.

merpnderp 10y ago
So, the debt was a very good investment and this is a success story?
alttab 10y ago
Simply common sense, really.

hacker_9 10y ago

From someone from the UK, $100,000 seems like an enormous amount within 6 years of leaving university. Is that sort of thing even possible here?

randomthrow123 10y ago
Junior analyst positions at some of the London banks are paid around GBP 50k as a starting salary, so I guess if you pursue banking it's possible
pjlegato 10y ago
Yes, in the massive London banking industry, though these are not accessible to most. 100k USD is about 76k GBP. According to [1], entry level analyst jobs in London banks pay £50k to £55k. In subsequent years, you make substantially more than 100k USD. A first year associate makes £90k to £98k, putting them well ahead of 100k USD in year one. [1] http://news.efinancialcareers.com/uk-en/164/the-current-state-of-salaries-bank-by-bank http://news.efinancialcareers.com/uk-en/164/the-current-stat...
deleted 10y ago
[deleted]
jordache 10y ago
Yes, and this person has a phD.. I would have expected that degree to fetch even higher salary...
rossng 10y ago
Edit: I thought you were referring to debt, not salary. My mistake. I'll leave my post intact in case anyone finds it useful. Yes, absolutely. Fees are £9000 per year. The minimum guaranteed maintenance loan, if you take it, is £3821 per year (though you may be entitled to a larger loan depending on your family circumstances). If you're doing a four year course, this comes to 4 x £9000 + £4 x 3800 = £51200 ~= $68000. If you come from a poor background (and so your parents cannot provide financial help), you may be entitled to a maintenance loan of up to £10700 per year. Grants (money you do not have to pay back) that used to cover most of this have recently been eliminated, leaving poorer students with larger loans. Over four years, this would be £78800 (approximately $104k). Having done three-year courses, many people go on to do a one-year masters at a cost of £10-15k. On top of that, the current interest rate on the loan is 3.9% - meaning that most people will actually be in increasing debt until they earn £40-50k. The only bright spot is that you pay 9% of any earnings over £21k towards the loan (like an extra tax). If you earn less than this, you pay nothing. The debt is wiped after 30 years. As a result there is no US-style problem of graduates struggling to make repayments. However, with the government having shown itself willing to retroactively rewrite the terms of the loan, who knows what will happen.

pm90 10y ago

I don't understand the anxiety that most Americans have about paying off student debt. Correct me if I'm wrong, but isn't that interest free and structured for flexible payments? In other words, one of the best kinds of debts to have. Why not pay it down when one really does have extra, or pay it down in small amounts? Edit: I stand corrected. It seems like only a minority of students get interest-free loans.

nickparker 10y ago
A small minority of US student debt is interest free. Federal loans are 4.5-7%, and private can be much more than that. Some programs defer interest until graduation, and others defer until employment, but neither of those is universal by any stretch.
maxxxxx 10y ago
The young guys I work with have loans that aren't interest free. Some i know of are 5 percent and higher.
mjmahone17 10y ago
It's not interest free. However, for personal, federal loans, the interest only applies to the principal, which is (value of principal + interest) when the loan enters the repayment period (so 1 year after graduation). So the loan only compounds once, when it enters repayment. My federal loans were a mix between 4.5% and 7.9%, with the 7.9% loans making up the bulk of my total amount. Additionally, I had something like a 4% "disbursement fee" added on to my loan principal for some (maybe all?) of my loans the day that the loan hit my bank account.
twblalock 10y ago
For a long time, Federal student loans had an interest rate of 6.8%. That's high enough that it is probably a good idea to defer investing until you can pay them off. Some private loans have rates above 9%. The alternative, which is much easier now due to some of the fintech startups like Sofi and Commonbond, is to refinance to a lower rate. The downside is that your loans become private, so you lose various Federal loan protections such as hardship deferrals, income-based repayment plans, etc. If you have a low income relative to your monthly payments, you should probably keep the Federal loans. But if your monthly payments are easily affordable, and you have decent savings in case you lose your job, refinancing is a no-brainer. You can get as low as 3%, which is low enough that paying the minimums and investing your extra disposable income is better than paying off the loans faster.

frank_jaeger 10y ago

Is this not just a humblebrag? I really fail to see the point of this. It is really cool to read about people who find inventive ways to overcome economic obstacles. It's somewhat boring to read that someone got a high paying job, and married someone with a high paying job, and then things worked out.

Mz 10y ago
This is the third story I submitted today from a series called Into the Black: https://medium.com/tag/into-the-black https://medium.com/tag/into-the-black which is about people paying down debt. This is the title that grabbed the HN crowd. The others got one and zero upvotes, respectively (so far). Feel free to go read the other stuff in the series if this is not your cup of tea. I didn't think it made sense to submit the link (above) to the series as a "story" on HN. But it is hardly surprising that this is the title that would grab the HN crowd. (shrug)
- frank_jaeger 10y ago
  It was by no means a dig at you! I'll check the others out for sure, thanks for sharing.
  - Mz 10y ago
    I didn't take it as a dig. I was bemused to see this get upvoted when the others were ignored.
misiti3780 10y ago
what was inventive about what she did - she lived cheaply and saved money every month
- alttab 10y ago
  Sadly enough that is considered "advice" these days. Compare this to the girl who tried to live in SanFran as a low paying worker and got fired from her job for complaining about it. Mentality is everything.

fhood 10y ago

What is the point here? If you take a postdoc position that means that you are aiming for academia, and expect to be paid poorly. And if you have a PHD in electrical engineering you should be able to find a job that pays at least 100k with no problem. Is the surprise here that postdocs aren't paid well? Because everybody and their dog knows that.

jordache 10y ago

yawn

tardo99 10y ago

I'm sure a lot of the entrepreneur folks on here have much more impressive stories: "I made my first million at age 23" and the like.

nathanvanfleet 10y ago

In my life I was always pretty worried about money. I put myself through school, worked full time etc etc. I didn't really splurge on anything and I just sort of lived a simple life. At this point I guess I've managed to amass enough value by having a house and a job that pays better than the jobs I worked back then, and wowee I'm not under water anymore. I don't really live my life any differently. But I do have that feeling where I could spend a few grand on something that was meaningful to me and not really be all that bothered by it. But isn't that just the result of playing your cards kind of right and living long enough? It just seems like there is a certain point in your life where the math of it starts working out in your favour. Then again I guess I know people about my age who struggle a bit more...

vbtemp 10y ago

This kind of thing triggers my crazy buttons: What kind of person goes into debt to get a PhD and then becomes a postdoc? Why not just leave off with a masters or BS and go off to get a great paying job and do actual work with a livable lifestyle?

exolymph 10y ago

As someone who's not on a programmer's salary, $40k is definitely not "shit". The lack of context in how this piece was framed deeply annoyed me, so I responded: https://medium.com/@sonyaellenmann/frankly-this-was-very-frustrating-to-read-5659ec87e96e#.2ors4vctl https://medium.com/@sonyaellenmann/frankly-this-was-very-fru...

rifung 10y ago
In fairness, I don't think that'd get you very far in Seattle, which I assume the guy went to since he went to UW. I imagine that's part of the reason they enacted the $15 minimum wage
- exolymph 10y ago
  I live in the Bay Area — just not San Francisco or Oakland — and the minimum I could live on is $2,000 per month (before taxes). But that comes to $24k per year, with is substantially less that $40k. Also the author was a woman, just FYI.
  - seanmcdirmid 10y ago
    My 60k CHF post doc was more than enough to live in Lausanne, which is way more expensive than SF or Seattle. I was also able to save about half since eating out was too expensive to consider.