How a family of 5 paid off $110K in student loans in 4 years

Posted: 29 April 2020 4:39 pm
News

Family of five sitting in front of a Christmas tree.

“It has to be a team effort and something everyone is brought in on — children included.”

Our new series highlights success stories from real people who’ve managed to dig themselves out from under a lot of debt in a short time. Answers are edited for length and clarity.

  • Name: Jon Shanahan, CMO of Stryx
  • Debt amount: $110,000
  • Type of debt: Student loans
  • Time to payoff: 4 years
  • Payoff strategy: Paid off highest-interest loans first, started a side gig and lived lean

What was the turning point that encouraged you to aggressively pay off your student loan debt?

Following blogs and authors that talked about the prevalence of debt opened my eyes to how burdensome it can be in the long run. Then, when my wife finished school, I realized just how much debt we were dealing with. Looking at the payoff calculators that showed how much interest we would pay back in a standard term was very eye opening.

The spark also came from realizing how much interest we were paying on our mortgage and student loans as I was preparing our taxes the first year we filed together. I never set out to go down the financial independence, retire early (FIRE) movement, but wanted to be conscious of any interest we paid outside of our mortgage.

Did you have a time frame for when you wanted to pay off the debt by?

It was always ASAP, but when we started it was a five-year plan. Through the side hustle and success at work, it was almost exactly four years from when we truly started.

What was your job situation at the time?

My wife Sofia was finishing college around the time we got married. We knew she wanted to stay home with our children, so it was important for us to figure out how to make that work. She had worked retail and food service through school, and we put that money toward our student loans while she was still in school.

I worked full time during college and after school kept working a retail gig when I started a corporate marketing job. When I landed a technology sales job, we got very serious about paying off the debt because I could see a path to doing so in a few years.

Did you have a mortgage and car payment at the time?

I bought a house when I finished school in 2013 and fixed it up, so the mortgage was affordable, but still our largest monthly expense.

We had half a car payment — for a couple years we shared the car I bought in college and kept racking up the miles. We were always planning out where we were going so we could maximize our drop-offs and time spent waiting.

After we had our son in 2015, we did end up getting a “family car,” which was a used Ford Escape, but even the first few months we had our son we still drove our one car.

What was your financial situation at the time?

With my sales job, it was very possible to make over $100,000 per year with strong performance, but that’s never guaranteed.

It was important for us to live very lean and budget as if I would never get a commission check so that any additional income could go directly toward our debt.

We were paying about $1,200 per month in loan payments. Then, in the middle of each month, we would pay any extra that we could toward our debt.

What steps did you take to pay off this debt?

Living very lean. After the “aha” debt moment, we looked at our monthly budget and figured out how much we could/should spend. We also largely stopped saving for retirement to make sure all efforts were going toward our higher-interest loans. We had a small emergency fund, then worked toward each debt.

The Dave Ramsey method is to tackle the smallest debt first, but mathematically I wanted to get rid of our highest-interest loans first, which were our private student loans.

We were good at outlining a budget, but not exactly keeping track each month. While I think you need a budget, clearly we did it without micromanaging. It’s always important to have goals and guidelines, even if you lack in the execution.

We cut most of our credit card purchases and only used them consciously, paying off balances and tracking our spending via Mint so we would have a complete financial picture across all our accounts.

We also held off any major purchases, vacations, and other experiences. We got very creative with how to have fun as a family and spend time together without spending a lot of money.

Did you explore any other strategies before deciding on this option?

Yes, I was certainly aware of other methods, but blending the parts that would work best for us made us successful. What’s most important is to just get started. You can plan all you want, but start small by cutting out unnecessary expenses and just becoming conscious of where all of your money is going.

How were you able to do this while also starting a family?

The saying my grandfather always said was, “If you wait to have kids until you can afford them, then you’d never have kids.”

We prioritized having a young family and Sofia staying home with them, so we made every decision toward that goal.

We certainly looked at the tradeoff of daycare versus working — there are financial arguments for both sides. If I could have switched roles, I would have loved to stay home. I definitely missed a lot of stuff in the first couple of years, but I was comforted knowing our kids were with one of us at all times.

What was the side business you started and how fast did it take off?

I started a YouTube channel — The Kavalier — which was focused on men’s clothing and became one of our bigger expenses. While it never “took off,” it grew enough each year that it was worth continuing to pursue on top of all of my travel and long hours.

Paying off the debt allowed us to reconfigure our entire budget, cut expenses and quit my job to pursue content creation and YouTube full time at the end of 2018.

Since you’ve paid off your student loans, do you have other debt you’re trying to tackle next?

One of our celebratory purchases after we paid off our student loans and I moved to working on YouTube content full time was to upgrade our Ford Escape. We had to do that to fit a third carseat in the car, so now we’re on track to pay off our new car within the next year.

Beyond that, I’d like to get our mortgage taken care of soon. I have also prioritized saving into our retirement accounts again now that we have so much extra cash per month without our loan payments.

What did you learn from this experience, and how are you using these strategies to help you stay on top of your finances today?

Conscious spending, making our own food and delayed gratification are all natural habits now. Smart grocery shopping instead of relying on restaurants or take-out is a huge one that we learned can add up. We also regularly audit what we’re spending and make sure our credit card is always paid down. We still live as if we’re paying down a big debt, but our savings account is actually growing now, which feels really good.

Are there any other details you think can help shed light on your story?

Our ability to save and live below our means was certainly helped by living in Pittsburgh. The cost of living, especially where we are just outside of the city, is very affordable and helps us get the most out of every dollar.

I was also careful to maximize our credit card points without spending too much time managing them. There are a lot of games you can play with the cards, but I think there’s a law of diminishing returns when you spend too much time trying to earn a few extra points by jumping around on cards or juggling a book of them just to earn an extra percentage point.

It has to be a team effort and something everyone is brought in on — children included. We always skipped gifts for major holidays with the understanding that we were always working toward our goal, so it was always more about the time we spent together than gifts or things. I think that’s an important aspect we have certainly carried on.

Photo source: Jon Shanahan

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