If you had a financial fairy godmother, what would you wish for?
A new home? A robust retirement account? An emergency fund that could cover you no matter what?
Well, we don’t have a magic wand, but we do have the next best thing: four real-life cases of people who’ve achieved enormous financial goals.
On Day 11 of the 12 Days of LearnVest, it’s time to get motivated. What better way than seeing how others like you did it? From the woman who repaid nearly $100,000 in student loans in four years to the couple on track to pay off their house in five, let these true stories inspire you to make your money dreams come true.
Plus, we even got some insight from a LearnVest Planning Services CFP®.
Read on to hear from the people well on their way to achieving their ultimate financial goals—as well as David Blaylock, CFP®’s take on the lessons you may be able to apply to your own situation.
And go ahead, tell us in the comments: Which big money goals will you be pursuing this year?
“I paid off $90,000 in student loans … in 4.5 years!”
—Erica Wong, 28, New York City
Where She Started: In 2009, about three months after Wong graduated with a degree in civil engineering—and about $3,000 tucked away in savings—she started working full-time as a structural engineer with a $59,000 salary.
How She Saved: “First I had to find out exactly how much I owed,” recalls Wong, who was fortunate enough to have parents who allowed her to live with them outside New York City for below-market rent. “Then I listed loan institutions, interest rates and amounts on a spreadsheet. I started with the highest interest loan and threw all the money I could at it.” Then, as each highest-interest loan dissolved, she’d tackle the next-highest one and so on. While most of her loans were public, she also had one private, consolidated loan.
Wong paid her highest-interest loans manually (she submitted her payments each month instead of automating her payments and letting the bank take care of it), and for the ones with lower rates, she would set to automatic payment on the longest repayment plan she was allowed by the loan institution—the longer loan period meant a smaller minimum payment.
During a typical month, this meant putting about $1,600 toward the highest-interest loan and $500 toward the others, which was no easy feat: Wong wound up devoting about 66% of her post-tax income to her student loans, then another 20% to her parents for rent. “It left me with about $400 of disposable income a month,” she says. “That’s about $13 a day.”
The Hardest Part: “I was miserable for the first year, constantly questioning why I went to work just to pay off student loans,” she recalls. Living on $13 per day meant making changes: buying clothing only when something needed replacing, scaling back lunches and dinners out, and discovering affordable new hobbies, like hiking, through Meetup.com.
Dialing down her lifestyle wasn’t easy. “It was soul crushing—it made me feel like a failure,” Wong says. “But I also knew if I wanted a life without the bondage of student loans, I needed to pay it off. Mathematically, my best option was to pay the loans off as quickly as possible and save on interest payments. So I continued on. I just took it month by month, and I got used to it.”
“If I can pay off $90,000 in a little over four years, what’s to stop me from saving up $100,000 in the next five?”
Where She Is Today: “I paid the final 10 cents on my last student loan in November, approximately 4.5 years since I started working,” says Wong. For now, she’s shifted her savings strategy to tackle other goals. “I would love to catch up on the retirement savings I’ve been largely neglecting for the past 4.5 years,” says Wong. “If I can pay off $90,000 in a little over four years, what’s to stop me from saving up $100,000 in the next five?”
While she is still living with her parents to help with their mortgage, she may move out in the coming year. “Coming off paying most of my income into student loans, it gives me tremendous satisfaction to begin building assets,” she says. “I appreciate the experience and the money discipline I gained from dealing with this amount of debt, and expect my life will continue in a money-conscious, alternative consumer style.”
The CFP® Says: ”Setting a goal and sacrificing to achieve it is a lesson that will serve Erica well for the rest of her life,” says Blaylock. “She used a debt-repayment method called ‘Rack and Stack,’ where you attack your highest rate debt first while continuing to pay the minimums on the other debts, clearly to great success! The one note of caution I have to add is that neglecting retirement savings to tackle student loans isn’t usually the wisest move. Time is the biggest ally we have when saving for retirement, and it can be difficult to make it up later.”