Have you ever thought about what life might be like if you didn’t have debt?
We did…and it all started in early 2018. In this post we’ll discuss the beginnings of our journey as it relates to the FIRE movement, national debt averages, and highlight our objectives, goals, and what we’ve achieved since we’ve started.
FIRE Movement: New Movement, or Old Concept with New Flare?
Did you know there’s a relatively new (old) movement mostly driven by the millennials? The FIRE movement is only 4 years into it’s official classification although the argument can be made that people from all walks of life have been striving for financial independence and it’s concept is nothing new. In fact, there’s new subcategories of FIRE that have spawned in recent times. These subcategories are called FatFIRE and LeanFIRE and these subcategories identify with different groups of people. FatFIRE has been identified for people who are often high-income earners looking to achieve financial independence leveraging their income to do so. LeanFIRE however, is a group of moderate to lower income earners striving to achieve FIRE by lowering their expenses and limiting how much they spend each month focusing strictly on their savings rate each month. This isn’t to say that the FatFIRE folks aren’t doing something similar, but it’s definitely a must for the LeanFIRE people.
The most interesting piece of the FI (Financial Independence) movement is the simple fact that it’s very definition is interpreted in a variety of ways each unique depending on the individual(s) situation and goals. Even if the situation and goals vary from person to person, there are some common objectives of the FI movement: We call them the 3 “ing’s”.
- Increasing Monthly Savings Rate
- Decreasing Monthly Expenses
- Investing The Rest
To most successful FI’oneers, these are the utmost important guidelines regardless of the situation and goal. I’ll add an additional one that has been important to us and might be for others pursing financial independence:
- Increasing your Monthly Income.
This ‘ing’ essentially is similar to increasing the savings rate, but if you have an opportunity to accept a new job, pursue a new venture, etc that would increase your monthly income you should consider it, especially if it would allow you to reach your goal of ‘FI’ sooner.
The bottom-line here is there is no single path for each person to choose. You have to find what works for you.
What Group do you associate with?
To be honest, I believe we fit right in the middle of both groups as we ultimately look to achieve the same goals. We associate debt to imprisonment. Imprisonment from true happiness, the ability to live life, and the freedom from work schedules and employer restraints. For us, the dream is to retire early, although it’s tough to pinpoint an exact age, but our reality first is achieving financial independence. We like what both groups stand for and ultimately support both in their efforts. We started our journey following Dave Ramsey’s ‘snowball’ advice to pursue the high interest loans first which will create a snowball effect for the others. We mostly stay true to this, but have deviated depending on what each month has in store for us.
Regardless of which group you fall into, or which path towards financial independence you choose, it has to work for you. Additionally, not every month will be a ‘success’, but if you remain dedicated and diligent, you can still reach your goal(s).
Debt, The National Average vs Our Debt
According to CNBC Average American Debt 2018, the average American now has about $38,000 in personal debt, excluding home mortgages. Additionally, Credit cards and mortgages tied as the leading source of debt, followed by student loans and car loans. This article further breaks down debt by age group and based on these designations, we apparently have a foot in both the Elder Millennial (25-34) and Gen X (35-49) age groups. At the time of this article we were both 34/35. In these two groups, credit card debt followed by Mortgage debt were reported to be the highest. Based on our situation, I’d say that’s pretty accurate with the exception of our student loans. We have advanced degrees which puts us in a large debt bracket than most our age. This time last year, we were in process to start our full-time RV journey. Here’s was a brief breakdown of what our debt looked like in August of 2018 from highest to lowest:
- Primary Home Mortgage – In Year 2 of a 30 year loan
- Vacation Home Mortgage – In Year 1 of a 30 year loan
- Combined Student Loan Debt – Owe $112k+
- Single Credit Card Debt – Owe $8500.00
For the sake of this post and our FI journey we’ve excluded our mortgage(s) from our debt pay-off plan and strictly focused on our Student Loan and Credit Card Debt.
However, based on the statistics mentioned by CNBC, we fall into the percentage most affected by mortgage debt with our student loans in a close second. Related to the national average, we combined to exceed the average by $82,500 for a total of $120,500.00 of personal debt and student loan debt. The significance of this amount is what stemmed our journey to live differently and make lasting changes for our financial future.
Student Loans…The Reason For Our Journey
For those of you like us, we worked hard for our degrees and that came at a cost. In the form of student loans and the overwhelming feeling like these loans are a life sentence. I would imagine we aren’t alone in this, but what do you do? When most of your monthly budget consists of paying a mortgage, food, and groceries, how on Earth can you pay more than the minimum? We spend a significant amount of time reading the Interwebs and how the elder millennials and younger millennials struggle every month to make any dents in the principal balance and majority of the payments go straight to interest. How does our generation(s) succeed? Most cannot afford a home and often split rent with multiple people in a single home just to survive. Those that can afford a home are pretty much stuck without much of a budget to live life, explore, and have fun.
According to Credit.com (Average Student Loan Debt),
- Average student loan debt total per person: $31,172
- Total student loan debt in the U.S.: $1.52 trillion
- Time to pay off student debt: 10 to 30 years
Furthermore, “In the first quarter of 2019, student loan debt rose to $1.49 trillion—that’s more than the national totals for auto loan debt (1.28 trillion) and credit card debt (850 million). “
It’s no secret that we have a student loan problem in the United States. Why is it this way in our country? Did you know that in many other countries a resident of that country has access to post high school education oftentimes with little to no cost? These individuals obtain a degree and in some cases travel to America, become citizens, and start earning a solid income? This isn’t anything new, but it shows that many of U.S. Citizens are at a disadvantage if we cannot fund college out of pocket or through scholarships. In our case, we combined of total more than $120,000.00 in student loan debt. That total doesn’t include the many years of making payments prior, but for the purpose of highlighting our journey, this is the amount we documented as our starting point.
Credit.com mentions the most alarming piece of student loan debt. “Many Americans pay student loan debt even after they’ve retired”. Many times this debt is from co-signing on loans for their kids to attend college. So, think about this for a second….on average it takes *most* borrowers 21 years to pay back their student loans, only to later help pay their children’s student loan debt after retirement. Why? Here’s why….Colleges have exponentially increased tuition rates by 145% since 1975! Additionally, credit.com mentions, “A collaborative report released by the Association of Young Americans (AYA) and AARP, showed that 31% of baby boomers, ages 54 to 72, were forced to stop saving for retirement in order to pay off student loans. “. Talk about a terrible situation.
Our plan to avoid this epidemic, what we have achieved so far, and what’s next?
In October 2018, we made changes. Significant changes. We read a good bit about RV living, travel, remote, and Locums positions for our careers, we also watched tiny house living and began looking at our lifestyle. We determined that we had more than we needed. We researched ways to increase our monthly income while simultaneously decreasing our expenses. We came up with the plan to put our home (now Domicile, see our past post) up for rent, purchase a 5th wheel RV, sell a couple cars to buy a truck to pull it, and donate/sell many of our things we no longer used or needed. The RV would be our home, but with limited expense, we would live at campgrounds across the country while working remotely and as a Locums contract employee, which will provide us the ability to save more and significantly double (or triple up) on payments directed at our credit card and student loan debt. In the first few months, our ability to put money towards our loans was slow, but we still made headway. The plan was to live full-time in our RV for a year and hopefully payoff the student loan debt during this time. Here’s what we’ve achieved since October 2018:
- Started with $120.500.00 Student and Credit Card Loan Debt
- In June 2019 we paid our largest amount towards the balance, $29,700!
- In August and September 2019 we paid another $20,000!
- In the months prior we paid more than the minimum (circumstances allowing), oftentimes between $2500-$5000.
- We started with the credit card debt of $8500 and paid that off between November 2018 – January 2019
- We paid off Brett’s loans totaling $22,000.00 by April 2019.
So what’s your remaining balance totals?
- As of today (9/12), we have an outstanding balance of $29,600.
- We’ve paid off more than $93,000.00 in 10.5 months!
- The goal is to pay this remaining balance off by end of October 2019.
- October 2019 marks a full year of RV living. (10/23)
What’s the plan afterwards?
To be honest, this is currently being discussed and we haven’t finalized any plans yet. We have discussed continuing on our RV journey for at least another year, possibly longer depending on how we feel. One thing is for certain, anything related to the removal of all debt is on the table. As long as we can continue RV life it will enable us to continue increasing our savings rate and our ability to setup a possible ‘early retirement’ from fulltime work in our careers. Our plan would be to work temp contracts, part-time, etc in our careers while focusing on other revenue streams and passions we love. We hope to head out west at some point, continue to travel and explore, and live a life free of debt. We try to focus on one month at a time and not think too much about the next month, we take advantage of the time we have together, and tackle any challenges we face head on…together.
I’m not sure who needs to hear this….BUT, if you feel compounded by debt, fearful of the future, unsure if you’ll be able to make that next payment, we felt the same way. If you are fed up with your current solution, don’t give up…you have the power to change it. Dig deep, consider what means the most to you, focus on that, find the courage to change, and consult with others that share the same passions. It’s ok to live differently and remember this….”Authenticity over Approval”. You don’t need approval from anyone to live your life how you want to. Stay authentic to your beliefs and you’ll succeed. If there are challenges, accept them and overcome them. Take one day at a time. Breathe….you got this.