Today, I have paid off all of my student loan debt, purchased a home, and started running a YouTube channel called Millennial in Debt to help other people achieve their financial goals. But for a long time, I had a very different relationship with money.
My brother and I are first-generation Americans. My parents came to the U.S. from Haiti when they were teenagers. While my mom attended high school here, neither of my parents had traditional college experiences, so education was really important to them.
Like so many first generation children of immigrant parents, I felt pressure to obtain the American Dream. That meant going to a four-year university, getting a degree that led to a respectable career, and eventually owning a home.
But a lot of what I knew about money was self-taught and led to many errors and in my teens and early 20s. Like the $60,000 dollars in student loan debt I dug myself into to cover school, which in turn ballooned into $102,000 dollars by the time I finished paying it off.
While I worked to navigate the debt I had taken on, I also had to develop a whole new approach to money to help me build wealth for the future. Here is what I've learned.
For a long time, I thought paying my bills on time made me responsible. This thinking gave me a false sense of financial freedom.
After graduating in 2010 with my master's degree in adolescent education, I spent the first three years of my post college life teaching high school English in New York City and actively avoided engaging with my loan providers. Instead I chose the payment plan that allowed me to pay the bare minimum. When I no longer qualified to take part in the graduated repayment plan, I made the decision to switch to an interest-only payment plan, which was a big mistake.
I never considered that this would end up costing me more in the long run. Instead I focused on the immediate satisfaction of having to pay the least amount of money on a monthly basis. Because the more money I had in my pocket, the more I could go out to brunch, get my nails done, and take vacations with my friends.
As long as my monthly bills were covered, the extra money I had was mine for the spending.
Video by Courtney Stith
On my 25th birthday, three years after I graduated from college, I decided that it was time to move out of my parents' place and into my own home. No preparation, no research: All I had was the premise that, since I had a degree and a job, it was time to buy a house.
The real estate agent I enthusiastically called that same day brought me face to face with a harsh reality. He made it very clear that I would not be approved for a substantial mortgage amount because I had a large debt-to-income ratio. I also didn't have the 20% down payment, couldn't pay for private mortgage insurance, and certainly didn't have the cash to cover closing costs or lawyer fees.
Needless to say I was not ready, and I did not move anywhere.
At first, I was furious. But a few days after that tough conversation with the real estate agent, I finally decided to sit down and get my financial life together, starting with a call to my loan providers.
Video by David Fang
Over the course of those three years, I'd paid the minimum on my loans every month, which amounted to about $6,700 a year. I had paid $22,000, but that initial $60,000 balance was now approaching almost $80,000. Switching to the interest-only plan extended the life of my loan another 30 years.
This was hard to hear, but I needed to know what numbers I was working with in order to make some real changes.
Working backward has always been a key strategy in my day-to-day planning, and I decided that I would use that approach to help put together a plan to tackle the rest of my debt.
Although student loans are simple interest loans, the interest on the principal is calculated daily. So I decided that at the end of every calendar year, I would pay off one of the loans I had in its entirety, based on which had the highest interest rate. At the time, I didn't have any savings to speak of. Whatever was in my checking account I used as money for my bills, and I saved whatever amount was left over.
I read about sinking funds, accounts where you set aside money for a particular goal — in this case paying off my debt. So I completely overhauled my approach to spending to start one. I canceled subscriptions I didn't use, started doing my own nails, brown-bagged my lunches, and declined all group birthday dinners until further notice, and put that money towards my loans. And I started thinking about what else I could do to bring in more revenue.
Video by Courtney Stith
The extra streams of income helped me fund my sinking funds for the year, while simultaneously helping me to build an emergency savings fund essentially from scratch. I also made a point to learn as much as I could about the student loan industry.
While I was struggling with my debt, I saw money as something you used to survive. You work, you make money, and you spend money. I never saw it as a way to build more wealth and create financial freedom for myself. But during this process, I started to understand money as a tool.
Even as I was making progress, I still felt extremely alone. But when I was about a year and a half away from completely paying off my debt, as an outlet, I created, wrote, and acted in a web series called "Millennial in Debt," all about my experiences with adulting and student loans.
Three years and over 31,000 subscribers later, that project has grown into so much more. I make new videos every week to share my experience and help motivate and guide others who are in the same boat I was in. The channel has become not only a revenue stream for me but also a safe space for others to talk and learn about personal finance and building generational wealth and share their debt-free journeys.
In December of 2018, I was able to pay off my last remaining student loan. After all was said and done, I paid my provider a whopping $102,000. I closed on my first home the following month. Today, I've moved beyond simply paying my bills on time. My focus has shifted to investing and increasing my net worth in order to build generational wealth.
I believe that it is never too late to change your relationship with money. The journey might be uncomfortable and difficult, and you may have doubts, but I remind myself everyday that personal finance is personal. There is no one right way to achieve your money goals.
Melissa is the co-founder and content creator of the Millennial in Debt brand. She has paid over $100,000 in student loan debt on a teacher salary and is currently teaching millennials how to get out of debt, build generational wealth, and earn financial freedom.
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