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Backstory Part 4: Be open to new ideas and opportunities.

Lesson 4: The Rebound. Be open to new ideas and take advantage of opportunities when they come your way.

In October of 2012 my boss at Nike told me my contract would end on December 31st. At that point our student loans had been in hardship deferment for 15 months. For those of you young and naive readers out there, hardship deferment is when you’re too poor, or don’t have stable enough income, to make the monthly payments on your student loans. And if you thought the student loan overlords would take pity upon our souls, and keep our interest from accruing while we were suffering through a difficult situation, think again! During this time our student loan balance was increasing to the tune of $18,000 per year!

Our student loan balance was so large we couldn’t wrap our minds around what it would take to pay it off. The enormity of the task when contrasted with our current financial situation was incomprehensible. At least knew we could cover our living expenses and count on a few months of stability.

We needed to take advantage of these few months and come up with a plan to get to the point where paying back loans was fathomable, let alone possible.

The Friday after my boss told me my contract would end, Katie and I went on a date. We brought a notepad and wrote down ideas.

One of the ideas we decided to pursue was for me to take the GMAT and get an MBA. Someone at Nike had mentioned an MBA as a way of becoming a successful business attorney. I thought maybe I could do part-time legal work for my own firm and spend the rest of my time getting an MBA from a school nearby (probably going into more debt to fund a portion of our living expenses and my education in the process).

The other idea we pursued was to aggressively and humbly send out my resume and cover letter to law firms throughout the state. My hope was that firms in more rural areas may have a hard time attracting young talent. Thus, they’d be more willing to take a chance on a green attorney.

I did two things concurrently.

I signed up to take the GMAT.

And, I went through the yellow pages for the entire state of Oregon and made a mailing list of about 175 small law firms. I crafted a cover letter and resume which spoke to my Rural-Oregon, blue-collar upbringing. Then, I printed out and sent those two documents to every firm on my list.

Then, a miracle happened: SOME OF THEM ACTUALLY RESPONDED!!!

I could hardly believe that after years of hardship, struggle and rejection, that anyone might want to hire me. Every time a firm contacted me I felt a rush of much needed confidence. In the end, I received about 20 positive responses. Each one brought with it the hope that I might finally get a real job.

A few weeks after my contract with Nike ended, in January of 2012, I took the GMAT, and our entire family took a road trip through Oregon to meet with 18 different law firms. We arranged to stay with friends and family to keep our costs as low as possible.

The morning of the GMAT I was frustrated. I had been sick with the flu for a week. I had barely studied. I wasn’t optimistic. I actually looked into postponing the test. But, there was a $50 dollar fee for rescheduling it, and we couldn’t afford $50 dollars, so I went and took it!

I finished the test and began walking to the front desk to collect my score. I caught the eye of the old couple that ran the Kaplan testing center. They both gave me a sly smile and thumbs up. As the old man handed me my score, he said “we don’t see many scores like this around here.” I looked at the paper, I read the numbers, and I had no clue what they meant. Was it good? It must be, otherwise they wouldn’t have said anything. But how good was it?

But, there was no time to figure out the riddle. I returned home late and early the next morning we were on the road to meet with a host of law firms. The next five days were a whirlwind of driving hundreds of miles with kids and meeting sage old men. Apparently, my eagerness and youth had most appealed to lawyers of advancing years. They were looking for a young man to add some energy to, and eventually take over, their firm. Of the firms I interviewed with, only one had an attorney younger than 55. It wasn’t until I had a day with no meetings, and we were staying with friends, that the subject of my GMAT score came back up.

My wise friend, Tyler, asked, “how good is your score”? When I didn’t really know we started looking up average entrance scores at the schools I was thinking about attending. My average score was WAY higher than the schools I had initially considered. We looked up a list of top business schools and compared my score to their average entrance scores I looked up and said “do I want to go to Harvard or Stanford or something?”

This test score opened a gaping door of opportunity that I hadn’t considered. I applied to, and was accepted at, several top business schools. Some offered very good scholarships.

Also, my trip through Oregon bore some fruit. I received full-time offers from three of the law firms I had interviewed with! Now, for the first time in 5 years, we had choices to make.

First we considered the legal opportunities. The law firms were each offering about $70k/year. We did the math and realized that if we took one of these offers we wouldn’t be able to significantly pay down our student loan balance right away. However, it was likely my income would increase when I took over for the older attorneys within a relatively short period of time.

Then we thought about getting an MBA. This time, unlike when we started law school, as we considered the return on investment for higher education we did it right. We researched. We talked to people. We thought about probabilities and best (and worst) case scenarios in real terms. We looked at industry outlooks. We looked at growth forecasts. We considered the trajectory of the economy. We thought about the types of jobs my experience would lend itself best to. Finally, we looked at how fulfilling the jobs I could expect to find would be to me.

When we weighed the two options, we decided to give higher education one more try. In an ironic twist, I think the fact that I had options made it easier for me to go back to school and get an MBA. I wasn’t going back to school out of desperation. I was doing it because it felt like the objectively right choice. Also, if our projections were correct, I expected my earning potential would be greater with an MBA than it would have been with one of the legal jobs. Plus, I just thought I would enjoy business work more than being a small-town attorney.

As cool as going to Harvard or Stanford would have been, seeing as we were already heavily in debt I decided to attend a much less expensive MBA program with excellent average starting salary statistics and a very high job placement rate.

During the first year of my MBA program my suspicions were confirmed. The business world is COOL! Business school is all about human behavior, math and statistics, and ethical responsibility. It’s about creating value and sharing that value with the world. I felt empowered to directly make the world a better place. I LOVED business school. It fit me, and it felt right.

During the summer between the first and second years of my MBA program I won the internship lottery! I worked in a process improvement strategy internship at Adobe. I love Adobe. Their products are cool. Their employees are cool. The company is just cool.

After graduation I worked as a business manager at an engineering firm. In early 2016 some friends at Adobe reached out and said the perfect role for me was opening up. I was offered the job and in March of 2016 I came back to Adobe. After seven months of being back at Adobe I can say without hesitation that an MBA was totally worth it for me. I love what I do, I love the people I work with, and I don’t believe there’s any other path I could have taken that would have resulted in this much happiness and satisfaction for me.

As a HUGE bonus, while I was in my MBA program Katie networked with a local graphic designer. That designer asked Katie to shoot some styled desktop images. It sounded fun so Katie agreed. After the shoot she asked her graphic designer friend “is there a market for images like this”? The graphic designer explained the market need and in true Katie fashion she though “I can do that”!

She began selling styled images on Etsy in April of 2014. Her sales grew like crazy during the first six months and steadily continued. In August of 2016 Katie launched a new full-service subscription model website: katemaxstock. Things are going phenomenally. She’s providing value to her clients and she’s able to make her business work within her schedule.

So, after nearly a decade of misadventures we both feel like we’re in a position where we can be happy long-term and we have a solid plan for paying off our debt!

So, how did we get here? Let’s recap.

When a new opportunity came our way we never said “this isn’t part of our plan,” or “this isn’t what I went to school for.” We always took the time to look into it. We objectively evaluated all new opportunities and thought “will this make my life better”?

When I jumped to different contract roles, and took the leap to humbly send out my resume and take the GMAT, eventually leading to business school and getting the job I have today, my one goal was always to do what was best for me and my family. The same is true for Katie as she left law school, began in floral design, pivoted into photography and finally specialized in stock photography. The goal was always to do what was best for our family.

So, to you out there who are about to go to school or who have already graduated and are trying to pay off debt, my advice is: be creative. The road less traveled often has the richest rewards. Look at every opportunity for what it is: an opportunity. Take advantage of the ones you should, and ignore the rest. But don’t ever disqualify yourself from an opportunity simply because it wasn’t part of the original plan. Needs change, circumstances change, and plans change. Take advantage of those opportunities which best meet your current situation.

Things will work out.

 

Next week: How much student loan debt can you afford?

In Backstory

Backstory Part 3: When life gets tough stop complaining and figure it out!

Lesson 3: The Fallout. When life gets tough stop complaining, roll up your sleeves, and figure it out!

As much as I like the other lessons explored to date, this is probably my favorite. 2011 and 2012 were a couple of really crappy years. My work was inconsistent, we had no way of paying back our mountain of student loans, and we didn’t have enough money to live day-to-day.

Not having enough money to live on, and having to rely on charity, was a hard lesson. Not having a clear path to success was incredibly difficult. Scrimping and trimming every last bit of fat from our budget wasn’t fun. But, these few really difficult years taught us far more than all the years we spent in higher education. It was during these years that we became adults. We accepted responsibility for our situation, and we began working our butts off to find a way out!

The substantial loans we accumulated during law school went into repayment in July of 2011. I had just finished the bar exam and had hope that, when the results were posted, I would pass and be able to find a job.

During all the nonsense that was my life, Katie wasn’t idle. After leaving law school she applied for lab technician jobs, but it turned out her undergraduate degree wasn’t very marketable (more on marketable undergraduate degrees in a future post). After several weeks of rejection, she became frustrated and began applying for anything she saw available. She worked odd-jobs, waitressed for a day, and was generally rudderless. Finally, she remembered one of her many talents: she is a gifted floral designer. She had taken classes during high school and college, and had arranged flowers for several weddings while we were undergrads.

She found an open position with a florist near our home. A few weeks later she said “I can do this myself” and decided to start and run her own floral design business from our home. Being 100% supportive of my intelligent and capable wife we began work.

We converted a small room off our garage into an office where she could meet with clients. We bought a cooler, work-bench, and after a few months she earned enough money to buy a delivery vehicle. Although her income was good, we were not disciplined financially during this time and we were not nearly as wise with the money Katie earned as we could have been. We spent what she made and didn’t plan ahead or reduce our reliance on student loans.

By 2011 she decided flowers weren’t lucrative enough, and that they didn’t provide a satisfying level of value to clients. She hated the wastefulness of spending thousands of dollars on something that would be dead in a week. She decided to use her connections in the wedding and events industry to pivot from floral design to another of her artistic talents: photography.

We fondly remember 2011 as the “black hole year.” I struggled to find work and took the bar exam. Katie spent the year selling one business and building another. The hustle was constant and the rewards few.

Finally, in October of 2011 Katie landed her first few weddings as a photographer, and I found a contract position that would bring in some money. During 2012 Katie’s photography business was successful. She photographed dozens of weddings, built a brand and reputation, and took care of many of our expenses. I spent 2012 hopping from contract job to contract job, trying to find something worthy of my education that was stable.

We were barely making ends meet, but we were learning and things were getting better.

So, what did we learn?

We really learned how to budget:

We cut every unnecessary penny of expense from our lives. Our rent was $1,200 a month, and our total expenses were $1,600 a month. We spent no money on entertainment, we never went out to eat, we didn’t buy gifts for each other. The $400 difference was spent on utilities, transportation to work, and household items we needed. We took full advantage of both food stamp benefits and state healthcare. Speaking of…

There’s no shame in doing whatever you need to do:

Government programs aren’t the most efficiently run, but they’re there for a purpose. That purpose is to help otherwise responsible people make ends meet when they have no other alternative. My only regret with government programs is that we didn’t take advantage of them sooner. I would advise anyone who qualifies to use these programs to do so.

My only caution is that you don’t get used to spending all the benefit money provided each month. Continue to budget and use this resource wisely. Don’t get sucked into buying low quality, easy-to-prepare food just because you have benefits available. Stick to healthy fruits, vegetables and proteins.

Also, any balance remaining on your account carries over after you’re no longer eligible for benefits. These “saved up” benefits can really help with the transition to full-time employment. Once our eligibility ended we were able to make our remaining balance last for an additional five months!

It’s the small things that matter:

Looking back, this time was a blessing. We focused on what was really important: friends and family. Through our hardships we built lasting relationships with others. When I wasn’t working or applying for jobs, I was able to spend a lot of time building my relationship with my son. During this time we were as financially poor as we will ever be. But, even as poor as we were, we felt rich because we had a healthy and happy family, we had enough food to eat and a place to sleep. I had skills which I knew would eventually allow me to provide for my family, and we learned lessons about financial responsibility that we may never have learned if we hadn’t been forced to.

These financial lessons (which we have been and are currently applying) will be a tremendous benefit to us throughout our entire lives.

If you work really hard, things eventually work out:

By the end of 2012 we were finally climbing out of our black hole. Katie’s business was thriving and I landed a contract job at Nike. The contract was only supposed to run for 6 weeks but it was extended several times to the point where I was there for nearly 6 months!

We knew our current hustle wasn’t sustainable, but these breakthroughs gave us enough money and time to rebound and plan our next steps.

Next week: the rebound.

In Backstory

Backstory Part 2: Things don’t always go as planned

Lesson 2: Things don’t always go as planned. Understand your worst case scenario and at least be aware of it. Or, even better, be prepared for it.

Then law school happened.

Katie has an undergraduate degree in Physiology and Developmental Biology and wanted to use her scientific knowledge to become a patent attorney. I have a (useless) Political Science degree and wanted to work in politics. We had done some research on the job market for attorneys going into our chosen fields and learned that, in the market that existed in 2007 when we were entering school, Katie could expect to earn a very good income when she graduated (about $140k/yr), and that I would be able to earn enough to make law school worth my time (about $80k/yr).

Our plan seemed reasonable. We took out our allotment of student loans with full confidence that we would earn our degrees, begin jobs in our chosen fields, and pay back our student loans over the course of the next decade.

Then life happened.

Katie had a crisis when she felt the distinct impression that law school wasn’t the right path for her. She spent months agonizing over her decision. Finally, near the end of our first semester, she took a permanent leave of absence.

We were so caught up in whether this was the right decision for her, we didn’t have time to think about the financial impact Katie’s leaving school would have on us long term. It turned out that the impact was bigger than we realized.

Although Katie had a full-tuition scholarship to the law school we attended, we had still taken out some loans on her behalf to pay a portion of our living expenses. More importantly, most of the (very little) math we had done around how long it would take to pay back our loans assumed her high expected income upon graduation. With that patent attorney paycheck out of the equation, our ability to pay back loans looked bleak.

Then, in 2008, our outlook went from bleak to impossible. The legal profession was one of the hardest hit by the economic crisis. Many attorneys who graduated in 2007 and 2008 lost their jobs. The attorneys who graduated in 2009 weren’t able to find jobs. When I graduated in 2010 the market was at its worst. Fewer than 20% of my graduating class was able to find work. Those looking for work were competing for spots with the experienced attorneys who had been displaced at the beginning of the crisis. All government agencies were on hiring freezes. I started looking in earnest for full-time work at the beginning of 2010. By the middle of 2010 finding a job looked increasingly impossible so I delayed graduation a semester (taking on more loans in the process) to give myself more time to look. It was futile. I applied to hundreds of jobs in 2010 (5-10 jobs a day, many of which required multiple very specific essays), and got only a handful of interviews. Besides that, the jobs I was applying for were nowhere near the pay I had expected going into school.

So, what did we learn?

First, things don’t always work out how you plan. We entered law school fully expecting that our best case scenario would be waiting for us with open loving arms upon graduation. We were probably more delusional than optimistic.

We should have at least taken a few minutes to think about the answers to a few questions, like:

What do we do if either of us feel like law school isn’t the right path?

What do we do if we’re not able to get a job?

What if one of us gets really ill?

What if we have a child?

You get the idea, there are a lot of MAJOR things that can happen over the course of a few years and we hadn’t considered any of them. Having not even considered them, there was no way we could have had a plan in place to be prepared for them.

For those of you thinking about post-graduate education, think about what could happen.

For those of you in post-graduate education, think about what is happening.

For those of you with advanced degrees, how did it go? Exactly as planned, I’m sure.

Take time to think in real terms about what you’re getting yourself into with post-graduate education: debt, time, uncertainty, changing preferences, changing industries, etc.; and make a plan taking your worst case scenario in mind. Then, if everything turns out perfectly: GREAT! If not, at least you’ll be prepared to deal with the fallout.

Next week: the fallout.

In Backstory

Backstory Part 1: It’s never too early

So, how do you accumulate $350,000 in student loan debt? Over the coming weeks we’ll be sharing our story to help you, our readers, understand how we got to where we are today. As we share our story we’re going to highlight a few key lessons we’ve learned that we think (hope) others will find valuable.

On to the good stuff!

Lesson 1: It’s never too early to start paying off loans! Set ambitious goals and be pleasantly surprised when you achieve them.

We were married in 2005 after our Sophomore year of college.

Katie is a super-smarty-pants and earned the most prestigious scholarship offered by our University. That scholarship paid for Katie’s entire undergraduate education. Tuition, books, living expenses: the whole thing!

After my Freshman year, I took a break from my education for missionary service. Before I returned to school for my Sophomore year I didn’t have quite enough time to make all the money I needed for the next semester, so I was forced to take out two small student loans totaling $2,500 (at this point it’s important to note that neither of us relied on financial assistance from others after we were married).

Both Katie and I worked part-time on-campus during undergrad. Katie worked for the same department from her Sophomore year through graduation. I worked at the same job during my Junior and Senior years.

When we were married Katie earned $9/hour and I earned $8.50/hour. We certainly weren’t living extravagantly, but with what we earned we met our basic needs. By the end of our Senior year, through raises and promotions, Katie was earning $12.50/hour (as a tutor for a distance education program) and I was earning $11/hour (as a student supervisor).

When we completed our undergraduate degrees in 2007, through diligent budgeting, taking advantage of federal grants, and planning ahead, we still had only $2,500 in debt.

But, should we have had any?

Let’s look at how our earning potential changed; and, if we had kept our expenses static while we were married undergrads, how much of this debt we could have paid off.

Warning: boring math alert!!!

We earned about $5,600 during the first semester we were married (hourly wage x 20 hours/week x 16 weeks in the semester). The last semester of our Senior year we earned about $7,720. After our second semester of marriage we moved into a less expensive apartment, saving us an additional $200/semester.

If we had kept our expenses static from our first semester of marriage through our Senior year of undergrad and saved the difference, we would have accumulated $5,400 by the end of our Senior year; more than enough to pay off the small loans we had and graduate debt free.

Why didn’t we do this? This would have been a relatively easy goal to accomplish, and help us lay the groundwork for setting and meeting larger goals in the future! What were we thinking!?!

We weren’t, or at least our logic wasn’t sound. We thought, “We’re super poor students! Let’s have a little fun right now and we’ll just pay off all our debt when we have our high-paying attorney jobs after law school. Then this debt really won’t matter.” [Spoiler Alert! A lot more on this reasoning (and why it’s wrong) in the next post!]

More than 10 years later we still have this debt. As the years have passed these loans have been a minor annoyance. The balance hasn’t even reached $3,000 yet. And, at 1.75% interest, the increase on these loans isn’t even keeping pace with inflation. Still, this is money that, at some point, we will have to pay back. Also, 1.75% interest student loans don’t exist anymore. Getting ahead of your loans matters way more today than it did when we were young undergrads years ago.

Setting ambitious but reasonable goals (like paying off small student loans even when you’re still in school), and working towards those goals, matters. Foregoing a small expense when you’re young has a huge impact as you grow older.

As we look back on the choices we made with money in our early 20’s (Which weren’t even really that bad. We were living on budget and saving money!) we would gladly give up some of the weekly trips to our favorite Indian restaurant, and the few pieces of furniture, to just not have to ever think about those two small loans again.