[Anonymous]

Not 100% sure this topic is right for this forum – but let me lay it out.

As aspiring, or already CPAs, we are required to get an education. Many of us even have more than 4 years, whether due to career changes or state mandated minimum education requirements to become licensed. Based on this, as well as how expensive an education is nowadays, it is a good bet that most of you, like me, have a negative net worth due to a large amount of debt.

Although partly myth – but mostly true in my experience – accountants are conservative, goal-oriented and can be frugal when they set their minds to it.

So, how did, or do, you deal with your student loans?

I am around two years out of school with around student loan debt in the $30’s. I am on a long payment plan (I think it is 25 years – I should know this!) and have a minimum payment of around 240/month – although I pay closer to $400/month. I recently moved to a nicer area closer to where I work (much more expensive), and purchased a really nice La-Z-Boy couch and am thinking of getting a big screen TV. BUT, I’ve started to feel guilty. Am I being irresponsible? Should I be living more frugally and try to triple my payments?

If I was smart, I’d live in a less convenient area and with roommates (likely chopping my rent in half but also adding to my commute). I’d stop buying shit that I don’t need (my little tv that I bought when I was 14 still works great – only 1 trip a year out of town to see my family would suffice). If I were smart, I’d live super frugally for the next 10 years of my life and put any salary increases towards my loan balance. But then again, I want to live, am easily able to pay all of my bills and save a little each month, and tend to think of student loan debt as good debt (vs. credit card debt, which I pay off completely every month). So although I do feel a little guilty, I’m not convinced I’m doing things wrong. Am I?

I am also curious on how you managed your debt after college.

[Anonymous]

Fuzyfro: Did you really just say that credit history is irrelevant in getting a loan?

[golfball7773]

@Fuzyfro and Bill – I was actually wondering the same thing since I worked as a loan processor before….?

FAR: 63, 55, 62
REG: 65, 77*
AUD: Fail, 64, 71
BEC: 72, 74, 81

*expired

[Study Monk]

^ My investment of 65K is yielding over 30K per year and will likely continue comparable returns for the rest of my life? Genius….. (NOT being sarcastic)

I spoke to an ancient wise man who sent me on a mushroom induced journey through an ancient forest to find the key to passing the CPA exam. A talking spider monkey told me to throw the last of my drinking water in the dirt to find what I was looking for. So I followed his instructions and the following message appeared in the soil:

"Do 5000 multiple choice questions for each section"

[Study Monk]

I didn't realize until this post that there is a passionate right and a passionate left when it comes to finances. And just like politics the people who are correct are usually in the middle 😛

I spoke to an ancient wise man who sent me on a mushroom induced journey through an ancient forest to find the key to passing the CPA exam. A talking spider monkey told me to throw the last of my drinking water in the dirt to find what I was looking for. So I followed his instructions and the following message appeared in the soil:

"Do 5000 multiple choice questions for each section"

[golfball7773]

I have had friends follow the Dave Ramsey plan in which they bought a crappy house to build equity and pay off debt. However, that house is now falling apart and needs a new roof, new siding, new wiring…….The estimate was around 14k to fix……

Instead of the wife studying for the CPA after work, she picked up a night shift at the local grocery store.

It just goes to say what StudyMonk mentioned about the different views in debt management. Some want to pay it off slower and live and others become a Ramsey Robot (not saying it is bad).

FAR: 63, 55, 62
REG: 65, 77*
AUD: Fail, 64, 71
BEC: 72, 74, 81

*expired

[jeff]

The Dave Ramsey plan doesn't prescribe buying any sort of house while you're in debt.

Mock it…follow it…I don't care…it's your life and your money 🙂

[golfball7773]

I know that Jeff 🙂 I always made fun of them for doing it because he states you don't buy a house when you are broke. You rent until you pay off the other debts. That is what my wife and I are doing.

FAR: 63, 55, 62
REG: 65, 77*
AUD: Fail, 64, 71
BEC: 72, 74, 81

*expired

[renatria]

I'm going a different route.

I went back to college in my thirties, pregnant with my second child. 35k in loans later, I did not find a job paying what many of you are making, but work in not-for-profit accounting doing a job I (usually) enjoy and which is flexible enough to let me pick up my youngest from school in the afternoons (I go in way early and my husband drops her off) I'm only making minimum payments because I will qualify for loan forgiveness after 10 years of payments (financed through consolidation to 20 years)

I would have never made it back through college without loans. Like many others, I applied for scholarships and grants, and while I got some, they wouldn't have paid all of tuition and materials, much less child care or other living expenses.

Still, even after my student loan payments, I'm doing better than before college- even adjusted for inflation.

[samdiegoCPA]

I have about 50k in debt and was put on a 10 year income based plan. I was supposed to start last Oct and asked for a one month extension, and they gave me a year deferral (ok, fine!). It starts at around $250/mo then changes every year or couple of years. I am scared to know what I will be paying on years 8-10, but hopefully my income will be able to support that.

Also, I can choose where to apply each payment (I think I have like 10 of them consolidated), so I will pay the highest interest rate ones down first, and the lower ones last. I believe you shouldn't let these loans take over your life and live how you want to without getting into financial trouble obviously. I always pay more in principal (VERY IMPORTANT) for everything (paid off my car in less than 3 years instead of 6 years with even just a small increase in extra principal) I'm 28 and will not NOT travel or buy something because I have student loans to pay off. Money will come and go. Live life, don't be held back by these dumb loans if you're doing everything else right (saving some for rainy day, saving for retirement, etc)

In re: to credit cards. You should definitely have one that you pay off every month. There are a lot of cash-back based ones or other rewards to fit your lifestyle. If you travel, you are stupid not to have a travel based card. I've gotten so many free flights, hotels, upgrades, or rewards from mine. I have a friend who has never had one and didn't go to college so has never had debt, and she qualifies for NOTHING at age 27. Her dad had to sign for her car and her apartment. I would HATE that.

AUD: 84
REG: 84
BEC: 79
FAR: 83

[Anonymous]

This is fun topic to skim over lunch 🙂

I wouldn't call myself a Dave Ramsey follower but my personal financial choices have pretty much followed suit to his teaching so far in life.

I grew up in a family of 8 kids and just about no money. When I went to college I only had the money in my pocket from my first jobs and working fultime the summer before starting my freshman year. I had just enough to pay for my textbooks and buy a laptop (which I then sold to my dad at a loss after my first semester because I blew what little cash I had left on walmart trips and needed cash to buy textbooks for the spring semester!!). I was fortunate enough to have goverment loans and I also took out the max sub and unsub loans.

After two years I moved to Rapid City to a slightly cheaper college and moved in with grandma (free rent!). Since I was taking night classes I needed a car to get to classes and my job. I paid for that car (3k) with loans that year.

I got married two years after that and finished college with 35k of my own debt and 10k of my husbands debt (all from school). We both have had our full-time jobs for a year and a half now and are living in a cheap apartment and watching that budget! In one month we will be officially debt free. After the loans are done in June, all of the payments we've been making (about 3k a month) will be rolled into saving for a down payment on a house.

People disagree about how smart that was to pay off loans when mortgage loan rates are so low right now… but honestly? I would not have felt comfortable adding a mortgage on top of our loans so soon into our careers. It will be nice to feel a little more ‘steady' when the time comes to buy a house.

We joke about how much our lives revolve around our budget. I even have a budget for my daily time at the coffeeshop to study (which I can increase if I stay underbudget in the grocery category!) We know where each and every dollar goes. And that is such FREEDOM to be able to look back and not wonder ‘where did all my income go!.'

So there's my story. Everyone's situation is different and the worst thing you can do is not even know what your own situationis. Know where your money goes, evaluate it, question it. Be aware of what you are doing financially and why!

*Oh, and I'm a fan of cash. My husband has had his CC since high school and pays it off monthly and I have one with my bank but have never used it (except that time I lost my debit card in the store and needed to pay for groceries…). My problem is that if I carry actual cash, I blow it and don't put it in the budget. So I actually never carry cash. I always use my debit card so I can use my online banking to help me budget.

[Anonymous]

Since this has turned into more of a discussion on debt in general…

I graduated with my masters in accountancy before I had any debt. I live in Georgia, where I qualified for the Hope grant, a few other scholarships, and grandparents who helped me out a little. I now owe my dad around 5k for my car,(I went to college in my home town and mom and I split the cost of the car and then both of us got to use it but since I moved off it is now mine), but that is all I really have.

However, I did decide to get a credit card so that if I ever needed credit I would at least have a crerdit score. The only one a qualified for was a secured Bank of America card. Which basically means I gave them $300 for the privilege of spending that $300 and replacing it over and over again. It was a little annoying. But I use the card for gas and such and pay it off every month. And now I have credit. So I got another credit card from Best Buy so that I could buy a laptop. I had the money in the bank, but this will smooth my cash flow out instead of one lump sum payment. Also, if you can get something interest free, then it would be better to place the money in a savings account and earn interest on it while paying the credit card off slowly and building credit.

I don't ever plan on having a lot of debt, because that would be stressful. But I think you can use it as a tool, just like anything else.

Warren Buffet once said that debt is like driving with a railroad spike sticking out from your steering wheel. If everything is going smoothly then there is no problem, but things get a little rough and it starts to become painful, and if you crash, you are dead.

[fuzyfro89]

Bill/golf:

No, I didn't say your credit score doesn't matter. I was refuting the point that keeping a debt outstanding to build your credit is a good idea.

If you continued reading… “because they do their own underwriting which is based on your perceived ability to repay the loan (considers more than just an arbitrary number from the credit agencies). “

I should have said, your credit score ALONE is irrelevant…underwriting includes a deeper review of income & expenses

[Anonymous]

“They will review your finances to determine if you can handle the loan based on your income/other debt payments, and payment history (did you default on something recently?).”

Payment history/defaults are some of the critera the credit agencies use to determine their arbitrary numbers. What you are basically describing is a credit score.

[Anonymous]

Did you really just say that credit history is irrelevant in getting a loan?

True story here:

My husband is an electrician so his truck is is office. He knew he was going to need a new truck so he started saving. Over 300k miles on the old one and it was starting to become a liability. Last October he goes truck shopping, finds what he wants and starts haggling over price. He gets the dealer down to $36k on a brand new Ford F250 4X4 extended cab. Then I enter the picture. After I made them throw out all of the useless junk they want to charge you for, the price was down around $32k. I left the picture at this point. Now understand one thing, my husband has never borrowed a dime in his life. He has the credit of a 9 year old. Not once in his life has he ever had a note of any kind. The dealer has him sign a bunch of stuff that he doesn't read and comes back to tell him that his credit was approved for a 5 year loan, $350 month payment, with a $5k down payment that his old truck would more than cover. Hubby calls me back in. He paid cash for the truck, $27k and he drove it off of the lot. No note attached and clear title in hand.

This little story goes to prove that you don't have to have a credit history to get a good interest rate or to get financing. You just have to know how to shop, how to bargain and how to save. So I agree that having a good credit history has NOTHING to do with getting a loan.

[san4596]

fuzy – I worked in lending for a while before changing careers. With that said, the debt to income ratio is used to determine if you qualify for the loan, but the credit score determines the interest rate. I know people who ruined their credit, and pay 13% interest on a car loan. Another who pays 7.75% on a mortgage when the market rates are less than 5%. So, everyone needs to do some work on their credit score, but do not get cray cray with debt.

Jeff – I thank you for bringing Dave into the conversation. I have some serious work to do with my wife though. She has no clue about finances, and it is like talking to a brick wall.

CPA EXAM: DONE!!!!
Ethics Course: Passed
Application Mailed: 3/16/15
Professional Conduct Exam: 97
Certification Date: 4/2/15!!!

[Author]

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