Welcome to Debt Free Journey. This interview series has been developed in collaboration with my friend Christian Ferrier from the Financial Alien.
We are excited to bring you a series in which we explore real-life stories on people working towards or who have already become debt-free.
Interviews will be conducted on an ongoing basis, with new interviews being published bi-weekly on Wednesdays. You can find past and future interviews in the series Main Page.
As our first interview, we have no other than Cristian Ferrier, the Financial Alien. He had accumulated close to $80,000 worth of student loan debt, and in the process knocked it out in one year. Amazing story. I am still shocked when I hear this story.
Let's feel inspired and moved by his journey. Enjoy!
- Debt paid amount: $80,000
- Debt source: Student loans
- Time to eliminate debt: 1 year
Tell us a little bit about yourself
Hello. I am Cristian, a 34-year old immigrant born in Bolivia who moved to the United States in 2006 at the age of 19. I have been married for 13 years and have two kids. We all currently live in Florida.
I went to school and obtained a degree in Computer Information Systems in 2012. Since then, I have been working in the Information Technology field as a Systems Engineer. My salary has increased over the years, going from about $25K in my first IT position to where it sits now at $135K.
As far as personal hobbies, I love going to the gym, and I recently started playing soccer with a group of adults in my community. I also love watching soccer, basketball, and Formula 1.
If people want to connect with you, where can they find you?
The best ways to connect with me are via Twitter or the Contact page on my blog, Financial Alien. I always like to chat and connect with other like-minded people, so if you have a question or just want to say hi, I’d love to hear from you.
Introduce us to your debt. Where did it come from? How much was it? How old were you when you first acquired the debt?
It was all student loan debt, the whole $80K of it.
When I was going to school and taking on student loans, I wasn’t conscious of personal finances. Because I wasn’t tracking my finances at the time, specific numbers are a little vague. But as far as I recall, about $70K of that debt came from my student loans and the other $10K from my wife’s.
I was 20 when I started going to college and taking on student loans.
Was the total debt always the same amount, or did it grow over time? What was the interest rate?
The debt grew over time. Again, I don’t have specific numbers, but about $40K was the actual amount of student loans taken in my case, with the other $30K being the interest accrued over time.
I had multiple student loans, a mix of Federal and Private, and Subsidized and Unsubsidized loans. Every one of them had a different interest rate, ranging from about 3% to 8%. On average, I believe the interest rate was about 5-6%.
Why did you choose to get into debt? Were you fully aware of everything you were getting yourself into?
Growing up, I was always taught that going to college and obtaining a degree was necessary to get a good job and make enough money to live a comfortable life, so I chose that path.
The problem was, nobody taught me anything about student loans. I didn’t understand how student loans worked, the difference between Federal and Private loans, or between Subsidized and Unsubsidized.
What’s scarier, though, is that at the time, I didn’t even care. I was just taking more and more loans as they came to me.
Paying off the debt
Did you already eliminate the debt, or are you still working on it?
The debt has already been eliminated.
If already eliminated, how long did it take you? Were you ahead of schedule set in the loan terms?
Here is where this starts to get interesting. Are you ready? It took us only one year to eliminate the whole $80K we had in student loan debt!
While ignoring the debt for a few years caused it to grow to where it was, we ended up paying it way ahead of schedule set in the loan terms.
If ahead of schedule, what made you want to eliminate it sooner?
Until we started paying off the student loans, they were in deferment, which means we didn’t have to make any payments yet. However, interest was still accruing.
We knew the deferment period was quickly coming to an end, and so the time to start paying the loans was coming to us. We needed to do something and do it quickly.
Now mind you, I mentioned earlier that I currently have a salary of $135K. However, at that time, my salary was only $65K and my wife’s $45K.
So how did we end up paying $80K student loan debt in 1 year, on a salary of $110K, while supporting a family with two kids? We had a great opportunity in front of us, and we took it.
Did you have a strategy to pay off the debt? If so, what was it?
We used the Avalanche method to eliminate the debt. With this method, we focused on paying off the student loans from highest to lowest based on the interest rate they carried.
However, a lot more than that allowed us to eliminate the $80K debt in a single year. Let me get back to that great opportunity I mentioned earlier.
It was an overseas job opportunity, to GTMO out of all places! That’s right, the Naval base in Guantanamo Bay, Cuba, where the famous military prison is located.
While GTMO is definitely not a vacation destination, the job opportunity offered us many benefits:
- For one, housing and utilities were provided to us. And I’m not talking about some military quarters. A lovely 3/2 townhouse was provided for my family and me to live there, all utilities included.
- Second, because of the Foreign Earned Income Exclusion IRS benefit, we paid no Federal Income tax on the money we earned while living there!
- And third, because GTMO is relatively small, with very few things to do and spend money on, we could save on transportation, groceries, going out, etc.
All in all, we stayed in GTMO for precisely one year, which was the minimum time I had to remain as part of the job contract. That one year allowed us to save enough to eliminate all of our student loan debt.
Did you take on any side hustles, overtime, etc. to eliminate the debt sooner?
No side hustles or overtime were taken during the debt payoff period.
What have your learned from all this?
That anything you set your mind to is possible. At the time, I would have never thought we would be able to pay an $80K debt in a single year. But it was possible with some luck (a great opportunity presented to us and us seizing such opportunity) and the willingness and desire to get out of our comfort zone and becoming debt-free.
Knowing what you know now, would you have done anything differently?
Absolutely. Not necessarily anything different on how we approached paying off the debt, as I think we did it in a pretty remarkable way already. Instead, I would change how I handled the debt:
- First, I would strongly reconsider taking on student loans, exploring and exhausting all other options, such as grants, scholarships, etc.
- Second, I would make sure to shop around for colleges and universities, as an in-state community college is generally much cheaper than a private university. My options were limited at the time because of my immigrant status, but shopping around for other alternatives is always a good idea.
- And third, if I absolutely needed to take on student loans, I would make sure to fully understand what I was getting myself into. This means learning everything from how student loans work, the difference between Federal and Private loans, Subsidized and Unsubsidized, interest rate, loan and repayment terms, grace periods, deferment options, etc.
Was the debt worth it? Did you get a return on your investment (ROI)?
I would say a couple of things:
- First, the same as I said before, to explore and exhaust all other options, such as scholarships, grants, etc., and shop around for schools.
- Second, to understand that you are going to school to learn, not to have a good time. And so your decision has to be made from that point of view. If you are thinking of going to school just to have fun and have a degree attached to your name, you are doing it wrong.
- Third, make sure you are choosing a degree that will give you an ROI. If you will pay tens of thousands of dollars for an education, it only makes sense you get your money back and more.
- Finally, to consider that not going to school and getting a degree is also an option. There are plenty of other paths to follow that can give you high earnings, such as certain trades or entrepreneurship
What would you say to someone struggling to pay the same debt as you?
Make a plan to tackle your debt. More importantly, turn that plan into action. The Debt Snowball and Debt Avalanche are two great methods for paying off debt. Each has its pros and cons, so you should learn about them and decide which one works better for you.
It is always a good idea to make yourself accountable as well. One way to do this is by letting others know about your plans. You will be more likely to stick to your plan and finish it if others hold you accountable for it.
Are you still paying any other debts, or did paying this one off made you become debt-free?
Other than our home, we are debt-free.
What are your plans for the money that was going towards the debt all this time?
While we were paying off our student loans, we contributed to our 401Ks just enough to get the employer match. As soon as we eliminated the student loans and became debt-free, we directed all that money towards savings and investments.
First, we worked on building an emergency fund of 3 to 6 months of expenses. When that was completed, we shifted into investing our money and making it work for us. We started maxing out my wife’s and mine 401Ks, IRAs and putting any additional money into brokerage accounts. Fast forward to 4 years later since we paid the student loans, and we have built a $650K Net Worth.
As far as what we are investing in, most of our investments are in Index Funds by far, accounting for around 90% of our portfolio. The other 10% are Mutual Funds in sectors that we like and believe in, such as Technology and Healthcare.
Why index funds? Because of the simplicity they offer. Index funds are indeed a set it and forget it type of investment. If you understand how the Stock Market works and has worked for the past century in the US, and understand compound interest, then index fund investing is a strategy that makes sense. It simply works
Where do you go from here? What are your personal and financial plans for the future?
My wife and I are working towards Financial Independence Retire Early (FIRE). We are projecting to reach it by the time we are 39 and 38, at which point we will most likely retire from our 9 to 5 jobs. What we do after that is unknown yet, but the whole point of FIRE is to give us that freedom to do what we want when we want, as we will no longer depend on a job to support our lifestyle.
Any final words?
No matter how large your debt might seem, you can do it; you can eliminate it, one step at a time.
But for that to happen, you have to really want it, more than other things in your life. You have to want to eliminate that debt more than driving that nice car, buying the latest phone, the brand new TV, or going out to eat three times a week.
You have to learn the art of delayed gratification. To make decisions based on how they will impact your future rather than your present.
Some Last Thoughts
Cristian and his wife Elizabeth have done an incredible job knocking out $80,000 in student loan debt. I am amazed by this story. It truly is amazing what you can do when you put your savings and habits together.
Cristian used his skills to grab a job with great benefits that helped him knock out a huge debt. His story inspires me and it should inspire a lot of people.
Knocking out debt is possible. Do not doubt yourself. Make every effort to plan to do what is needed to make sure you are debt free.
Feel free to check out the Financial Alien. Cristian writes some really great content about personal finances.
Do you have a FIRE story? If you do please feel free to reach out via our contact page, and we will be back with another great interview soon enough.
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” Spend less than you make, stay out of debt, and invest the rest”
I’m Steve. I’m an English Teacher, traveler, and an avid outdoorsman. If you’d like to comment, ask a question, or simply say hi, leave me a message here, on Twitter (@thefrugalexpat1). Many of my posts have been written to help those in their journey to financial independence. I am on my journey, and as I learn more I hope to share more. And as always, thanks for reading The Frugal Expat.