Flanice has paid $40,000 in student debt, saved $100,000 for retirement and become an avid investor - all of which she started on a $37,000 salary. She has built up some serious willpower to stay disciplined and focused on her financial goals and in this interview, she shares her tips and tricks on how she paid off her student loan debt, saves for retirement and plans her investments. All things that you can start doing too!
What was your "enough is enough" moment?
My first “enough is enough” moment occurred when I got my first real job out of college in 2007. I was making $37,640 as an intern in DC. I had two roommates in a 3-bedroom apartment with utilities included.
Even splitting the rent and groceries three ways, I couldn’t afford a car or to really enjoy my life. I felt like I was scraping by, especially with a student loan payment. I started a part-time retail job three months later to supplement my income.
The second moment occurred when I moved into a studio apartment on my own the following spring. I was paying $1,052 for 425 square feet and a parking space. It was ridiculous. I had enough for a car and insurance by this point but I didn’t have the flexibility I desired. Also, my student loans were deferred because I was in a Master’s program. As soon as my income went up, so did my expenses so I only saved a little at a time.
The third moment occurred right after I finished my Master’s in 2009. My best friend asked me to accompany her as she looked at houses. At this point, I thought a house would place me beyond poor considering how much I was paying for the studio apartment.
Little did I know, this would start me on my current path to loving everything about personal finance. I bought a 3-bedroom, 3-bathroom foreclosure for $129,000. I used the FHA option so I only had to put 3.5% down.
Also, this was the time where they were still offering the first time homebuyers tax credit. I used that money for minor renovations. My payment was $942 a month and I rented out my basement for additional income.
How much debt did you pay off and how much money did you save in total?
I paid off about $40,000 in student loans between 2007 and 2012. I managed to save over $100,000 for retirement between 2007 and 2016.
I did this with a combination of regular deposits/payments, company matching, applying cash windfalls and bonuses directly to debt, looking for multiple streams of income, and keeping my expenses low.
How do you keep yourself motivated?
I stayed motivated by keeping clear goals. I would write down short and long-term goals for where I wanted to be financially. I would be very specific about my goals. I wouldn’t just say, “I want to be debt-free in 10 years.” I would say, “I will pay off $X amount by Y date,” or “I will have Z in a high-interest savings account to cover six months of expenses.” For example, one of my current goals is to earn at least $50,000/year in dividends from my investments.
Also, I make a plan to reach those goals. For debt payoff, I list all my outstanding balances with interest rates and decide to use the snowball or avalanche method based on what’s prudent at the moment. For my $50,000 dividend goal, I researched the ETFs and stocks with the highest dividend yield and watched the market for price dips so I could buy as low as possible. I set up auto investments so money is continually being added and I am reinvesting my dividends.
How do you manage the days where you just want to go out and spend money?
I don’t really have days where I have to spend money. However, I have a weakness for food and pretty things so the easiest thing to do is stay away from the mall and cook tasty meals so I’m not tempted to shop or eat out.
Another way is to remember my goals. I think about how tasty Starbucks is but then I remember all that sugar is bad for me and I can invest that money instead. Another good way is to think about how my purchase will make me money in the future. For example, instead of buying a pair of Nike sneakers, I purchased Nike stock after it split for a fraction of the cost. (Yes, I also own Starbucks stock.)
Finally, I think about my bills. Before I left myself fall in love with a pair of beautiful shoes, I pick a necessity that the cost of those shoes would cover. For example, I love to look at Christian Louboutin footwear. However, I can’t justify spending my mortgage payment on a pair of shoes I’ll be too scared to wear outside.
Plus, once I’ve worn them, I can’t then sell them for enough to cover my mortgage payment if I needed to. I think I could be a multimillionaire and I still wouldn’t make that purchase…Okay, maybe just once.
What would be your money advice to your younger self?
Save, buy property, start a business, and make your money work for you as early as possible. Invest in what you know. Learn from others’ mistakes. Keep your debt to the absolute minimum with the goal being debt-free. Cash is King.
It’s nice to have nice things but they are not a requirement. At the end of the day, you can’t take it with you. Experiences are more important than a pair of shoes that will just sit in your closet. When you live a minimal lifestyle, it is freeing and your stress level will be greatly reduced.
What steps are you taking to ensure your debt freedom is permanent and what steps are you taking to ensure you meet your ultimate savings goals?
I’m currently building up my investment portfolio and maximizing my savings. I’m also cultivating additional streams of income that require little to no day-to-day management so I’m not wearing myself out.
What advice would you give anyone reading this looking for encouragement?
In addition to the advice I’d give myself, I say the following:
- Your biggest investment will be in yourself. Make sure all the moves you make are adding value to that investment.
- Planning is nothing without execution. Set a goal. Make a plan. Execute that plan. Repeat.
- Be flexible. Sometimes your plan will change course right in the middle. That’s okay. Just enjoy the ride and find the value.
- Be positive in spite of what’s going on around you. Whatever you’re going through is temporary.
- Take risks smartly. There is a risk in everything you do. Find your risk tolerance and work in that arena.
- Trust your gut. Your instincts exist for a reason. Take a step back and listen.