Pay Your F#$%ing Debt

45 Comments

I want to talk about the notion of debt repayment reluctance that seems to be plaguing twenty-somethings (and thirty-somethings, if you’ve let it get that bad). This is a tough conversation, because everyone is always doing their best, and no one wants to be told their best isn’t very good or might actually be the worst. Understand that simple tact might escape me, but I mean well: I will tell you what you’re doing wrong, because I want you to do it right. I am trying to save you from yourself. And one of the things I want to save you from is your debt.

[Explicit language: I used the f-bomb a lot in this post for emphasis and my lack of tact. You have been warned.]

I first want to acknowledge that having debt sucks, and paying it off sucks even more.

I should know. I vanquished over $20,000 in student loans at a time in my life when I wanted to put my first-real-job paycheque towards absolutely anything else. Being in debt means your money isn’t yours, and you’re obligated to give up a few hundred or even a thousand dollars each month to your creditors.

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Sometimes shirking the responsibility of paying extra and putting money into your own savings instead gives the impression you have more control than you do.

Instead of paying your creditors, you’re paying yourself, however small the amount. This is a false sense of security, but it feels very real. “Ha! It doesn’t matter if I owe $13,000 I have $6,000 in savings, I’m ok!” Some simple subtraction will let you know this is a farce (you are in debt) and you are merely delaying the inevitable (you have to pay sooner or later). I see right through you. Pay your fucking debt.

Likewise, splurging on a few items each month, be it a great cable package, new t-shirts, and some bottles of wine is a way of taking back your life. You think, “debt doesn’t control my life, I do what I want with my money!”, but you are delusional and bad at math. No matter how fabulous you look or how tipsy you feel, your debt is still there, quietly ruining your life. So stop fooling around and pay your fucking debt.

If you owe $20,000 at 5% interest and your minimum monthly payment is $150, it will take you almost 17 years to eliminate your debt and you’ll pay $12,125 in interest.

Increase your monthly payments by a mere $50, and not only will you be debt free 6 years earlier (yes, SIX YEARS), you’ll have spared yourself $2,710 in interest.

If $50 more per month is going to shave six years off your debt-repayment journey, stop being a cry-baby and pay your fucking debt.

Think of interest as a stupid tax that’s added to your loan balance every time you make the wrong decision with your money. $2,710 is a hefty “you’re dumb” bill that represents every time you chose dinner out over an extra debt repayment. The real cost of everything you buy its price plus the interest rate on your loan multiplied by however many years you’ll carry that balance. Oh, that Chipotle is looking expensive now, isn’t it? Resist, even you can’t justify $510 of burritos (that’s $6.25 once per month for 6 years at 5%, I don’t even want to hear your argument if your interest rate is a fraction higher).

I don’t care if you would have to uncomfortably downgrade your lifestyle to scrounge up the extra dollars. 

Welcome to real life where we don’t all get what we want all the time. I promise you cutting your cable bill will not hurt nearly as much as six extra years chained to your creditor at $150/mo. I don’t know where you’re going out to dinner or buying t-shirts, but there’s no way these extraneous purchases to support your lifestyle are “worth” a portion of your paycheque for six years. Your 31 year old self already wants to punch present 25 year old you in the face, because you’re screwing up their plans. They’re sick of lugging around your debt for the past half-decade and paying an additional $2,700 out of pocket because you really needed HBO. They want a tropical vacation, and if you hadn’t slacked off, they would have one right now.

Do I think you need to need to forsake all your worldly possessions and live with the austerity of a Tibetan monk while you allocate every penny that does not go immediately to your basic needs to your debt? No. But I do think if you’re making the minimum payment and ballin’ hard, you need a reality check. You’re not fooling anyone, especially not me, and not even yourself.

How much should you allocate towards your debt?

Well, whatever your minimum payment is, double it and then double it again: that’s your goal. Pay that. You think that will get you out of debt 4x faster because 2 x 2 = 4 but it’s even better than that. Your 17 year loan sentence of $20K at 5% will be gone in just 3 years (THREE YEARS!) because 2 x 2 now equals five times faster, such is the magic of compounding. Pay your fucking debt.

 I love when people are like, “the interest rate on my debt is only X%, I could get a better return in the market.” 

Ok, but you can’t. You should pay your fucking debt instead. 

Many millennials, myself included, have enjoyed stellar year-over-year returns in our portfolios for as long as we’ve been investing.

I only got into the stock market 4 years ago, and now more than one-quarter of my net worth is made up purely of interest, dividends, and capital gains. Why? Because there was still blood in the streets when I went into investing in 2010. As the market recovered from the 2008 financial crash, seasoned investors were wary while newbies like myself didn’t even realize we were entering at rock bottom. The result? Stocks recovered and spit out never-ending streams of money. The index was like a money machine where you just pushed a button and cash poured out. I think a lot of us patted ourselves on the back for being savvy investors, but the truth was it would have actually been very hard to lose money over the past five years. Now, 2015 has been off to a less than stellar start. The falling price of oil dragged down some of the highest-yielding dividend stocks: those in the energy sector. The Federal Reserve is expected to hike interest rates. Stock market returns have been flat, and are even hinting they might decline. After six-years the bull market may be over, so if you’re claiming you can earn a higher return in the market than you will in interest on your debt, share you secret with me, friend, or I’m going to call your bluff. Pay your fucking debt.

The worst thing you can be is resigned to your fate.

Paying off your student loans until age 57? That is not ok. You need to be very, very angry if you find yourself in this situation, and then you need to do whatever you can to immediately change your circumstances.

If you’ve been living with your debt for a few years you may have become accustomed to its presence. It’s been downgraded from an obnoxious guest in your life to a tolerable nuisance. Furthermore, you might have even rationalized that you can do nothing to stop it. You just write long-winded blog posts about how you’ll be paying off student loans until retirement, a victim of the system of for-profit post-secondary education, helpless at the mercy of the bank that funded your naive 18yro college-bound self. Well, maybe you ARE a victim and may it ISN’T fair that you graduated owing twice your gross salary in student loans, but that doesn’t mean you can’t change how the story ends. Take control of your own narrative. Pay your fucking debt.

Good luck!


45 Comments

  1. Josh Williams

    I’ve been reading your blog for a while, along with other notable PF bloggers (Budgets Are Sexy, Mr. Money Mustache, Dividend Mantra), but just now commenting. This is a great fucking post! Kudos!
    Out of curiosity, what’s the other 3/4 of your net worth made up of??? At 33, the vast majority of my net worth is made up of equities in various accounts – 403(b), Roth IRA, and a taxable acct. (I’m a U.S. reader if you haven’t figured it out by now 😉 ).

    In some cases, people actually can get a better return in the market than the interest on their debts. Historically, averaged out, the stock market returns roughly 9%-10% (dividends reinvested, and before tax). Granted that’s lower than many c/c interest rates, but that’s better than many student loan interest rates. I think the key here is to take long term views.

    All this being said, I’m a HUGE fan of getting rid of debts. I myself will be debt free in roughly a year and a half, and hopefully I’ll stay that way for the rest of my life! And I’m including the lack of mortgage payments in there too when I say that! I can’t stand not having full control of my money.

    • Bridget (Author)

      hahaha thanks Josh!

      My net worth is primarily common stocks & ETFs in my TFSA & RRSP accounts. I also have about ~10% of my money in cash.

      I agree you can often earn more money in the market than you’ll pay in interest on your student loans, but when it comes to something as puny as say, an extra $50/mo like I used in this example, you might be better off just getting out of debt faster than investing it — particularly if you’re new to investing and haven’t made your mistakes yet.

      Congrats on approaching debt-free! That’s a huge accomplishment!!

      • Josh Williams

        Thank you very much. It will definitely be a huge load off my shoulders.
        Keep up the fantastic posts! You keep a great blog here.

  2. J

    I absolutely love this entire post! I felt like you were ranting (in person) directly to me, and I love a good rant! I totally agree with how dumb it is to say you’ll make more than you’ll pay if you invest rather than pay your debt. How about you just pay your debt and then invest a lot more when you’re done!
    Granted, I could do a lot more to pay off my debt, but I do like my wine (sorry). We’ve reduced our cable, rarely go out, and we live in a basement apartment. I also work 4 jobs, and 3 of those paycheques go directly to debt and house savings. My debt WILL be gone soon, and your post just gave me the extra push to get rid of it that much faster!

  3. While I am a fan of interest rate arbitrage, I understand most people do not utilize this strategy correctly. Instead of using the money to fully fund their 401k or IRA, they instead buy a nicer car or home. I made sure to pay off all student loans with interest rates greater than 4%. In the US, I can no longer deduct the student loan interest for federal tax purposes, plus having the debt was just a wait on my shoulders. I’m down to two small 3% loans which I have pulled back the reigns on paying. I could pay them off now, but I’m more concerned with maxing out my retirement accounts and building up my cash a little. I’ll most likely just get tired of them at the end of the year anyways and just pay them off anyways.

    But I agree, for 95% of the people out there, just getting rid of the debt first and foremost is key! Great post.

  4. Fantastic. Next up – pay your fucking debt part 2 (for people who aren’t even making a minimum payment and think bankruptcy is a better choice than having to say no to dinner plans).

    Thanks!

  5. Co-signed. The victim card is being played a lot lately and it makes me want to scream. Instead I’ll just direct them here.

  6. Chris

    I love this article. I am just about to start repaying my debt, it makes me sick to my stomach thinking about it though. 60k in federal and 10k in private. Trying to tackle them, do not want to be 50 worrying about them still. I have a Roth IRA, that’s about it. I want to break into the stock market but lost on how to do so.

    • Bridget (Author)

      You won’t be stuck with them at 50! Starting now is the most important thing. $70K is a big balance, but it’s not impossible, and you will likely pay it off faster than you think.

      I would knock at least $10,000 off your debt before you get into stocks, just so your income/debt ratio is a bit more forgiving. Don’t worry, you won’t miss much — the stock market will probably be slow moving this year (and next). If you can put anything like tax refunds or bonuses towards it, even if that’s only a few hundred dollars, it will make a HUGE difference in the long run.

  7. One of the main reasons I am paying off my student loan early is for that exact reason you mentioned. I can’t imagine being 40 and paying off something I started when I was 18 years old, in fact it blows my F*$%^#@ mind. Fun post, f-bomb approved.

  8. We just paid off our debt after 5 long years, almost $100,000 and now are debating between putting extra on our mortgage or investing more. Whatever we decide though, at least we’re free of consumer debt! Actually 5 years ago, our minimum payments on everything was $2,500! Now every month it feels like we get $2,500 as bonus money.

  9. Good post, Bridget. It blows my mind how cavalier some people can be about their debt. There is an unfortunate sense of entitlement that comes with the attitude “oh I’m justified taking on this new debt / not paying off my debt because I’m sure I’ll always just be able to make more money later”. Whatever happened to a little bit of contingency planning …

  10. Barry @ Moneywehave

    too many people are focused on the monthly costs, they just aren’t interested in paying off their debt.

  11. Sean O'Connor

    Great post Bridget. As always, both informative and a little intimidating…

    Agree with Barry above – too many people are looking at debt from a cash flow perspective rather than a value perspective.

  12. AA

    What if the interest rate is 2.45%?

  13. Jaye

    “Ha! It doesn’t matter if I owe $13,000 I have $6,00 in savings, I’m ok!”
    ^ Haha – this is my mindset.

    I calculated my total debt: $10,148.74 as of today.

    $1,556.80 on a CC (12 months interest free, I’m only into the fourth month)

    $8,591.94 remaining on a car loan (the car loan is paid weekly and this week it cost me $19.14 in interest)

    BUT I have X amount in savings, and last month I received $110 in interest for them, and this month should be around $150 (current interest rate of 3.75%)

    So in my mind I’m not really paying interest because of that. Interest doesn’t feel like it’s coming out of my money. You can e-slap me for being so blasé if you want 🙂

    • Bridget (Author)

      haha but you ARE paying your debt — your not using your savings as justification not to make more than the minimum payments.

      I think a lot of people just look at the bottom line and if it’s “not that bad” they feel less motivation to kill their debt.

  14. Nailed it…get rid of that fucking debt. More importantly STAY OUT OF IT ONCE IT IS GONE.

    I will never understand why people think that they can borrow their way out of debt or work so hard just to fall back into the same old patterns.

  15. Yes, the only exception I have seen that might make sense are my friends in public service- in the US, their student loans are forgiven after 10 years if they have been a public servant all that time, and with one of them, it’s already been 3 years since she graduated from her masters program, got a job in public service, and since she has only paid the minimum, there will be a balance that will be forgiven at the end. I ran the numbers in her case and it was about $10K less than what she had as an original balance. Honestly, it doesn’t seem worth it to me to drag it out for 10 years and have that monthly payment commitment for that long, but I could see if the original balance was higher (maybe $70K?), then why not take advantage if you are planning to be a public servant. Otherwise, go ahead and just accelerate the payments and be done in 3-4 years, and use the next 6 years to save as much as you can.

  16. Such a great post, Bridget! My spending self-control has been slipping a bit recently but I am more determined to stay on track after reading this.

  17. It’s amazing how many people don’t do the interest math or read the fine print on their credit card statements. It’s horrifying and if someone reads their bill and doesn’t think paying off a measly few thousand bucks will take them YEARS they have some serious financial issues to deal with. Sometimes people need to hear the hard truth.

  18. colormefrugal1

    Love this! It took us probably way too long to wake up and smell the coffee concerning our debt. We finally woke up a couple years ago, and we have paid off a lot since then, but we really do have quite a long ways to go. At least all the smaller debts are gone now, and we are down to two student loans and a mortgage left. We are hoping to have the student loans gone within three years!

  19. Kathy

    Not paying a debt you incur of your own free will is theft, pure and simple. Someone gave you money…..yes, even a bank is “someone”….and you agreed to repay them with interest. Would you have been able to go to school without the loan? If not, that entity did you a huge favor advancing you the funds. I don’t care how big the debt is, or how long it will take to repay. If you signed your name to the bottom line of the loan documents, you should repay the loan. If you don’t you can just call yourself a thief.

    • Bridget (Author)

      I agree with you Kathy! It makes me frustrated sometimes to see people purposely depress their income or seek loopholes so that they don’t have to make any payments on their debt — and it seems it is sometimes their plan to do so indefinitely! Those options are there for people who are genuinely stuck and can’t meet their obligations, not for people who just want to dodge their responsibilities.

  20. Live like a student even after graduation – that’s the best advice I can give.

  21. seattlegirluw

    I never understand people who are more comfortable carrying debt in order to invest. This has actually been a huge struggle when it comes to our contributing to retirement. I keep putting off proper contributions, which is *not* the right way to go. But having debt just makes me antsy.

  22. Great post! I’m new to the whole PF world and things are a little different here in the UK. My student loan is only 1% and really isn’t something to worry about. However, credit cards and overdrafts have been my downfall. It’s time to pay my fucking debt.

  23. I had my wake up call last year. I was so tired of making the bare minimum payment and not making a dent. So I decided to go on a debt repayment mission in 2015 and throw every extra $ I have towards it. I just wish I had a side hustle to put even more towards it. Anyone who has debt grit your teeth, buckle down, and PAY IT OFF!!

  24. Stefano

    Great post!
    A friend of mine sent me a link to your blog/website after we discussed paying off our student loans (being an international student in Canada i spent about $85,000 on tuition fees alone, but managed to pay off 3/4 of the whole thing by working part time while being in school). I spent about 2 hours reading your posts and now I can’t wait to start killing that loan and saving some serious money.

    Keep up the good work 🙂

    • Bridget (Author)

      ahhh that’s such a great story! Awesome job!!

      I’m glad you like the site =) Let me know if there’s anything in particular you want to see or questions you have! I want to help you kill that loan!

  25. Bev

    I have $153,000 in college and law school debt, which I will forever regret incurring. Like you, I care a lot about health and fitness, and one program that has worked for me consistently is a boutique class that runs around $16 per class. I feel guilty when I buy packages of 10, because I feel like every extra cent I have should be going toward my debt. My minimum payments are currently $685. $120,000 of the debt will be forgiven in 9 years because of Public Interest Loan forgiveness. I’m trying to aggressively pay down the other $33,000 by adding an extra $500 per month. Should I be skipping all $$ spend on exercise classes?

    • Bridget Casey (Author)

      If $120,000 of your debt will be forgiven, you only have $33,000. The fact that you’re tackling this aggressively with $500/mo extra payments means you’re already going above and beyond to take care of your finances. $16/class might seem like a lot, especially when you add up the cost over months or years, but since exercise improves your mental and physical health, and that translates over into every other aspect of your life (including work and relationships) I don’t think you should cut it.

      If you weren’t making extra debt payments then yes, I’d tell you to cut it and focus on your debt, but the fact that you’re already taking care of your finances means you have the freedom to spend on things that make you healthy and happy. As long as you’re not taking on more debt for the exercise classes, I see no reason to cut them.

  26. Joshua

    I fuckin love this article. Thanks for the reality check.

  27. Ashley

    I love this blog post! I completely agree with everything you’ve mentioned…

    I am in the final month of my master’s degree internationally (my undergrad was also done internationally).
    I have $80,000 in student loans through the bank and another $46,000 through the government. I have my first “big girl” job lined up starting at $75,000 annually (with quarterly bonuses – anywhere from $2-6k).
    With that being said, my minimum payments between the bank + government = $1500/month. I plan to allocate at least $2k/month to debt repayment, but I feel like it is going to take forever!
    My partner has zero debt and is very supportive/reassuring we will get things paid off if we are smart with our $. We are moving back to Canada where we will need to finance vehicles (nothing fancy) and we are renting a 2 bedroom apartment, until we get a good handle on the debt repayment.
    Any advice from you would be appreciated!

    • Bridget Casey (Author)

      If you finance vehicles, no matter how un-fancy they may be, your debt is going to be over $150,000 pretty easily. Even with two good incomes that’s a ridic amount of debt.

      Choose a small apartment within walking distance or public transit to your work. Buy one used car outright, and share it. Try to live on your partner’s income and put the bulk of your paycheque towards your debt. If you pay $2,000/mo to your debt it will still take you ~6 years to pay off. If you can double this and use your bonuses, you’ll be done in less than 3.

  28. Mark

    Found you through a comment you made on that moron that believes one should “live it up in their 20s”.

    You’re doing fantastic with finances! Props to you. Far too many financially illiterate people running around. Because, well, they won’t pay their fucking debt!

    I bought a house in 2011. 21 months in I decided debt and interest is stupid. So I buckled down and hit it HARD. 19 months later I paid the house off. 40 months to pay the house off. A lot of people dilly dally with car loans that are longer than that. And more often than not, the car is worth exactly shit when the loan ends. At least not anywhere near what they sunk into it.

    6 months after payoff on the house I paid off $21,000 on a personal loan. I don’t make a lot of money, so I am not “privileged” in that aspect. I just decided I was sick and tired of giving all my money to the banks and wanted to keep more of MY money. I sold some belongings, took on extra work, whatever. I knew this wasn’t going to be a forever thing. Just enough to be completely out of debt, and have the freedom to choose when and where I want to work, and if I want to work. Today I have that freedom. I haven’t even hit 40 yet!

    I’ll never understand why people keep debt around so long it’s like a pet.

  29. Yeah. THIS. For FARRRRRR too long I operated like a whiny cry baby and didn’t pay more than my minimum payments, and sometimes I didn’t even pay those. I’ve been on an upward tick the last couple of years though.

    I paid off all my credit card debt, learned how to use my credit cards responsibly, got a job that comes with a 401K…blah blah blah.

    I’m now down to “just” my car loan and student loans – which, when combined, pushes $70,000. I’m spending AN ENTIRE PAYCHECK every month on debt. I’m literally throwing EVERY free cent I have toward my car loan, hoping to pay that bitch down ASAP, so I can then throw all that money toward my student loans. I still contribute money to savings each money – 10%, to be exact – because I have three kids and shit happens, but other than that, it all goes to debt.

    My financial goal for 2016 is to pay off 1/2 of my remaining car loan (totals $18,600 right now). I’m on target to meet that goal and then some…as long as my salary stays the same and no new expenses pop up.

    • Kelsey! You’re doing a great job! The fact that you can still save 10% while tackling that debt is amazing, and even though it feels like a lot right now, you’re making progress so fast that 6 months or a year from now, a huge weight will be off your shoulders. I definitely think you’ll be able to pay off half of your remaining car loan — that is a great goal and it will be such a relief once your debt load is lower!

  30. Alyssa

    Love this post! Such a good mantra!

    Time waits for no one. Pay your fucking debt!

  31. Amel

    This is the first post of yours I’ve read and it’s great! I would love to have some advice on budgeting for those among us who never got out of the education game – I’m $21K in debt and in a doctoral program. I pay into my unsubsidized loans (~$9K) every month but it definitely feels like a losing battle with an income fixed at under $2K each month. Any advice for how to keep growing my net worth even though I make pennies? Do I just need to get myself a side hustle?