Moneyish spoke to Phil Risher on how he quickly tackled his debt, despite earning just $48,000 a year. Here’s how you can follow his example.
At 22 years old, Phil Risher’s dream was to get rich. But student debt stood in the way.
The Maryland native and graduate of Geneva College in Beaver Falls, Pennsylvania, concluded his undergraduate career in 2012 with $30,000 in student debt. While that’s slightly under the national average for indebted Class of 2016 grads — they left school with $37,172, on average, in student loan debt — it still amounted to minimum payments of $300 to $400 per month over a 10 year period.
But Risher, an international business major, was determined to pay it off within 12 months of graduation so he could get out from under the burdensome feeling of that debt — despite landing a post-graduation job at a car rental company that paid just $48,000 a year (or $36,000 after taxes). In order to meet his goal, he’d have to pay $2500 a month towards his student loans, leaving him just $500 per month to spend on himself.
“In college, people are scraping by, [so] $500 a month to me felt like I lot of money. In college, if you had $500 a month, you [were] doing good… It really didn’t feel any different.”
The biggest way Risher lived on $500 a month was by moving into the basement at his dad’s house, which meant he didn’t have to shell out money for rent, utility bills, or lots of food. Without having to meet that cost, he could divvy up his $500 per week into $125 increments, which still had to cover his car insurance, gas, and what he calls his “yum, yum Fridays.” (From Monday through Thursday, he’d bring his lunch to work and eat it sitting in a park reading real estate textbooks, but on Fridays, he’d spend about $20 on lunch from a local restaurant.)
Risher also spent a little on his girlfriend, namely on outings together or paying for gas to visit her every other month at college, which was two hours.
Here’s how Risher’s monthly expenses broke down:
- $40 per month on gas
- $80 per month on eating out ($20 per week)
- $75 per month on car insurance
- $50 per month to World Vision (a charitable organization)
- Remaining $255 for “savings, misc. spending on clothes, other necessities, or girlfriend”
Risher says that his upbringing might have made this easier for him to do than for others. A self-described product of a “lower middle class” upbringing whose parents divorced when he was two, Risher wasn’t accustomed to living a high-flying lifestyle. “Neither of my parents went to college,” Risher told Moneyish. “There were times we never had a ton of money, but we were never on food stamps. We would eat macaroni and cheese every night.”
When he was “four or five” years old, his mom’s hot water cooler flooded all the carpeting in their house. Without enough money to replace the carpeting, “she bought me roller blades,” he said. His mom told him, “Hey, I took this carpet out for you, so you could learn how to roller blade,” rather than making the situation despondent.
“Even though you may not have a ton of money, you can still have fun. It’s all an attitude,” Risher reflected, looking back on this incident from his childhood. “The fact that she could take a crisis in her eyes and make it a party in my eyes sticks with me to this day.”
In analyzing Risher’s feat, financial experts agree that what he pulled off in paying down his debt so quickly is not easy, but most Americans facing such loan repayments (about 44 million people, who collectively hold $1.4 trillion in loans) can implement smart strategies to pay off their debt in a timely manner.
For one, if it’s possible to move in with your parents as you aggressively pay down debt, consider it; indeed, rent is often the most expensive cost you’ll face upon graduation. Or, if that’s not an option, get roommates: In some of America’s most expensive cities like New York, Boston, and San Francisco, this simple move could save you $10,000 or more a year in rent.
And Brianna McGurran, a student loans expert for NerdWallet, suggests that those facing student loans subscribe to the 50-30-20 plan, which is a “budgeting plan that suggests you set aside 50% of your income for necessities like rent and groceries and utility bills; 30% toward ‘wants,’ [like] movie tickets [or] drinks out with friends; and 20% or more toward savings or debt repayment beyond the minimum.”
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