Extreme debt repayment: where’s the line?

by Nick on August 15, 2012

Here’s a post that will inevitably fall in the “must be rough to make six figures” category if we don’t dig deep and focus on what we can learn and apply to each of us.  So let’s get into it with that in mind.  It’s another “how I erased my debt” story – one that has been told over and over again.  But this one is slightly different.  This one was a mountain of debt ($90,000).  And the debt belonged to a Harvard MBA making six figures.  And he paid it off really, really quick.  It’s based on a story over at CNNMoney.

What sets this story apart in my mind is that the typical six-figure worker would think, “I make $100,000, so I have enough money to take care of the basics, some ‘wants,’ and still pay off the debt ‘soon enough.'”  But not this guy!  This guy got intense.  To use his words, he vowed to do everything in his power “short of lying, cheating, and stealing,” to pay down his debt within 10 months.

To achieve that goal, he got a side gig (yes – on top of a 6-figure day gig), cashed out his IRA, shared Netflix, gave up dinner dates and movies, stopped 401(k) contributions, stayed away from family at Christmas and skipped parties and weddings.  He also brought a flask with booze to mix with purchased soda at bars, sold a car and motorcycle, rented his spare bedrooms to strangers through Craigslist and sold investments.

Within seven months he was debt free.  Wow.  Seven.  Months.

But if you know anything about me, you know (a) I have opinions, and (b) I like to critique people who aren’t me… haha!  So I, of course, have some reactions.

  1. He did an amazing job and accomplished his goal.  You can’t take that away from him.  He got at it!
  2. I’m not a fan of sneaking alcohol into bars.  I’m a former bartender, so this is a particularly sensitive topic for me – definitely biased!  But in my not-so-humble opinion, this seems to violate his edict of where he would draw the line.  The Netflix sharing is probably a grey area.  But I see little difference between sneaking liquor into a bar and taking liquor from a bar. I don’t know – maybe I’m too sensitive….
  3. Cashing out retirement accounts was consistent with the intensity, but I wouldn’t do it.  I get what he was doing.  He scored $8,000 from cashing out an IRA.  And he could “replace” it pretty quickly if he keeps the intensity up a bit longer.  But if he paid off about $12,000 per month not including the $8,000 from the IRA.  So it would have only been another three weeks to pay off the debt while keeping that retirement in place.  I don’t mind stopping 401(k) contributions as much (I still would generally contribute, but I see the point) especially if he was able to then max out the 401(k) for that year – since his plan only took 7 months he presumably had at least 5 months to pile money into the plan if he wanted.
  4. This guy started a side gig even with a six-figure income.  This goes to show that the income is just as important as the out go.  Sure, many people make a lot of money.  But if you’re having trouble reaching a goal maybe you can improve an area that’s already good (like this guy’s income).  It’s not always about “solving problem areas.”  Sometimes it is.  You’ll make the best progress when you “solve problem areas” and improve already-good areas.

I won’t pick it apart too much.  That guy rocked it.  And, I guess, like an old Hoboken-guy once said: he did it his way.  (Bonus points if you knew he was from Hoboken…).  But a few of the specifics didn’t sit well with me.

What about you?  Any problem with some of the things he did to get out of debt?  

What’s the most radical thing you’ve done to save money or pay down debt?  For me, I’d say that I’ve definitely kept a few articles of clothing waaaaay too long… like “free air conditioning” too long… I’d say I average 18 months between clothes purchases…

Until next time, put your credit card down and slowly step away from the mall!

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Image: FreeDigitalPhotos.net

{ 26 comments… read them below or add one }

Call Me What You Want Even Cheap August 15, 2012 at 8:38 am

I completely agree with what he did because it worked for him and only he really knows how much he wanted to get out of debt. I recently paid off a little over $95k. It took me longer, just under 3 years. He was much more intense than I was!

I did the normal things like limited how much I ate out, goiandroid the movies, and buying clothes. I wish I was more radical! I would have paid it off sooner.


Nick August 15, 2012 at 10:14 am

Wow – awesome job paying of $95 grand. And just under three years is definitely nothing to sneeze at (does anyone actually sneeze at things?). That’s a ton.


Jordann @ My Alternate Life August 15, 2012 at 8:49 am

The craziest thing I’ve done to save money… I’m not t00 crazy but this summer my 6 foot tall fiancée, my dog, and I bunked two nights in our Volkswagen Golf at a cottage in Prince Edward Island because we didn’t want to chip in for a cottage (which would have run around $400 for two nights). It was a tight fit but doable.


Nick August 15, 2012 at 10:15 am

I don’t know that sounds pretty crazy to me! Did your friends know you were going to do that? I like it. I predict great things if you keep up that intensity and focus. Very, very cool.


Jordann @ My Alternate Life August 15, 2012 at 2:48 pm

Oh yes they know about our frugality and my debt repayment. Plus most of them make about two times what we do, so they understand that we can’t afford to have the same type of vacation they’re willing to pay for.


Emily @ evolvingPF August 15, 2012 at 9:23 am

Like you said, it’s his life and his choices, but I wouldn’t have cashed out the IRA either or brought alcohol to bars. (Maybe it bothers you just as much, but I wouldn’t order anything, not even soda!) I don’t think the story would be diminished at all if he paid off his debt in 1 year instead of 7 months.


Nick August 15, 2012 at 10:20 am

No, that wouldn’t have bothered me. I would have offered you some tap water in a fancy cup to make you feel part of the group. I was never offended by people who didn’t buy drinks. I was annoyed by people who would sneak in drinks or didn’t tip (or barely tipped). I did part of a post on tipping a while back, and basically the point was you should tip if you’re out at a bar drinking because that’s part of the cost of going out (biased, of course). But whenever I happily gave tap water to the DD or someone just not drinking I found that I would either get a tip from them, bigger tips from the rest of the group or both. And if I didn’t, no big deal. I just don’t like what I perceive as “dishonesty,” which bringing outside liquor in would be.

(It’s also risky to the bartender or owner if the guy or gal gets in an accident on the way home because they drank way too much and way more than I would have served them… but that wasn’t my main complaint…).


Modest Money August 15, 2012 at 10:51 am

Personally I just don’t get why he would make all those sacrifices when he was making so much at his day job. I know I definitely wouldn’t do that kind of stuff if I had the choice to comfortably pay off the debt within 2 years with no sacrifices.

I haven’t really done anything too radical to save money or pay off debt. Like you I am pretty cheap about replacing clothes though. If it still fits, I will keep wearing it until it’s all faded and there are holes in it. Part of that is just a dislike for clothes shopping though.


Nick August 20, 2012 at 10:17 am

I year you. I tend to err on the aggressive or competitive side (blessing and a curse) so I probably would have ended up in the middle. Then again, if I were single, I might be aggressive like this guy. My wife is really frugal but would have NO part with some of these things.


MoneySmartGuides August 15, 2012 at 6:54 pm

I’m with you Nick. I think it’s awesome he paid off all of his debt in such a short time, but there were some things, like raid his retirement account, sell investments, skip weddings and Christmas, that I wouldn’t do. I’d be interested to see how much extra he paid off by doing these things. I’d rather be in debt for an another 6 months as opposed to raiding everything and missing events.

As for me, I’ve been known to unplug electronics when not in use. As many are well aware, even if a device is off, it can still draw power. I would either unplug it, or hook it up to a power strip and shut that off. Doing this did save me about $10/month, so I can’t complain about it!


Nick August 20, 2012 at 10:15 am

Unplugging electronics is something I just haven’t been able to commit to. I know it could save a few bucks each month that I’d rather put other places but for some reason I just haven’t been able to stick to it. $10 a month is nothing to shake a stick at – especially because I suspect there’s really only a few pieces of electronics that you plug and unplug frequently and most of them aren’t used most days. Very intense of you!


jefferson August 16, 2012 at 12:39 am

He probably did a bit of damage to his long term wealth prospects by cashing out his IRA and stopping 401k loan payments.. Granted, the interest you will earn is likely less than the interest that most debt owner charge, but there are also penalties to withdrawing retirement funds early.

I do question the logic of letting strangers off of Craigslist rent your spare bedroom. Personally, I wouldn’t go there.


Holly@ClubThrifty August 16, 2012 at 12:28 pm

I was just thinking the same thing! I am all for extreme debt repayment but renting bedrooms to strangers crosses the line! Maybe I would consider it if it was a family member or friend =)


Nick August 20, 2012 at 10:13 am

I agree, too. With a family renting out the spare bedroom to strangers is a bit dicey, but I agree that I would consider it for a friend or family member as long as I was comfortable that it wouldn’t kill the relationship.


John @ Married (with Debt) August 16, 2012 at 3:59 pm

We just paid off $100,000, but it took quite a few years. I stopped socializing as much, cancelled HBO, but we mainly made our most savings in our food/grocery budget. Man, this guy is a debt payoff superstar!


Nick August 20, 2012 at 10:11 am

Wow! That’s really great, John! HBO is overrated if you ask me. But that’s impressive. Most people leave the little money leaks like that thinking it won’t move the needle, but don’t consider the cumulative effect of that and the psychological change inside you to commit to getting out of debt.


TB at BlueCollarWorkman August 16, 2012 at 4:08 pm

Well every day coming home from work I take a different route to look for things people leave on the curb. I pick up “broken” things that are expensive, fix them easily, and sell them on ebay. It’s a tidy little profit and it’s helped my wife and me pay down our mortgage really fast!!

note: the guy with the picture at the top doesn’t look “extreme” in any way. lol 🙂


Nick August 20, 2012 at 10:09 am

Nice! I’ve heard great stories of people making a few extra bucks up to hundreds or thousands of dollars a month doing this with craigslist too. Blue collar workmen (pun intended) go to craigslist’s free page, find some furniture or whatever they can clean up or fix easily, and then turn around and sell it on craigslist or a yard sale. Very, very cool.

No, he kind of looks like a geek, huh, ha!?


Thad P @ thadthoughts.com August 17, 2012 at 7:39 am

Your point about out-go versus income rang a bell with me. The real issue will be now that the $90K mountain is whittled away, will he be able to not get into trouble again. Debt has a funny habit of being a bad habit.


Nick August 20, 2012 at 10:07 am

Thanks Thad. I sometimes forget to pay attention to the things I do well and try to just “fix” or “overcome” my weaknesses directly. Most of the time it takes both efforts to move the needle. And I think you’re right about needing to make sure the debt doesn’t creep back up. For him, at least it was student loans that can’t creep very easily. But all those people who put credit card debt on a HELOC, only to end up in credit card debt again (plus the HELOC) are hurting pretty bad.


JP @ My Family Finances August 17, 2012 at 6:35 pm

My thought would be “hey, whatever works.” Although his situation was unique. He did have an income that could support large payments. Even with three jobs I couldn’t muster $12,000 a month. He had a debt and salary that could reasonably be paid off in less than a year. Such intensity is not going to be worth it for everyone – especially if you are going to be paying loans back for years despite your best efforts.

This guy is great. I love his intensity, but if there isn’t a possibility of success in a short period of time, you’ll probably burn yourself out.


Nick August 20, 2012 at 10:04 am

Yeah, an intense sprint is certainly sustainable for a year or so, but it takes a “special kind of crazy” to keep that up for years and years.


Kim@Eyesonthedollar August 18, 2012 at 4:06 pm

I remember reading about this right after he paid off the debt. I think it was such a psychological burden to him that he had to do it this way. It also helps that he is young and single. I would not have been able to be so intense I don’t think, maybe if I had 90K in credit card debt?


Nick August 20, 2012 at 10:03 am

Yeah, it’s pretty impressive how intense he was, although it takes a pretty intense person to get through the schooling he did. You’re right though, sometimes you just need to do whatever makes you stick to it. If he let off the gas a little he may have just stopped.


American Debt Project August 21, 2012 at 7:47 pm

I took the $500 I was saving last week to buy a DSLR and put it towards my debt (plus another couple hundred). I am getting more intense with each month. But I have to increase income to get to my goal in the next 12 months…


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