When last we met, I gave you a broad overview of my family’s journey into a pit of financial ruin, and a rundown of Dave Ramsey’s baby steps, which we used to dig out of the hole. Today you get the gory details. Next time, I’ll take the opportunity to talk budgeting and to explain how we differed from Dave when in Baby Step 2 (the debt paydown phase)
Summer and fall 2013 were a whirlwind. Wife and I got married memorial day weekend, and she moved into my apartment in the Dallas suburb of Plano. I had recently been accepted to SMU law school’s (now defunct) evening program, and was working as a telecom software engineer during the day, making around $63k. Wife was working as an admin in a research clinic of a local hospital, making about $28k.
Really, though, to understand the situation, we need to go back a few months to 2012. I had just received my LSAT score and was looking for schools to attend. Technically, there was nothing holding us down. We could’ve moved anywhere in the country to do law school, but I had a good thing going at work, hoped to get in with their patents team, and didn’t want to get stuck in some coastal city just because they have a good law school.
My LSAT score could get me in almost everywhere short of Harvard, Yale, and Columbia. I was simply too white, male, and straight to get in there without a perfect 180 score, and my 174 didnt cut it. It didn’t help that my degree was in Computer Engineering, so my GPA was a lackluster 3.45. That made the rest of the top 10 schools difficult to get into, especially when accounting for scholarship. The scholarship part is essential, because everybody knows that you just don’t pay sticker price for law school.
A STEM 3.45/174 gets you pretty far in that second set of 10 schools, and even more so for the rest of the schools in the top tier (top 50 schools). Common advice for people in my situation would have been to broadly apply to schools 8-25, and select the best scholarship package received from that group. See, law is very prestige based, and opportunities available to the average student at Columbia arent available to the average student at Emory. There’s a whole tiering system and a whole lot of bullshit used to justify this whole prestige system, but all that matters is that the rankings of the schools do loosely correlate to likelihood of a good outcome.
I, having no clue about all of that, selected 3 schools to apply to, two in-state (Texas and SMU) , and a third reach school (Virginia) that I was going to leverage to get more in-state money. I applied to them all, but I was pretty well locked in on SMU. Their evening program meant that I could work my engineering job and cash flow school. Being local meant that we didn’t have to move. Being the premier school in Dallas meant being able to get any law job in the Metroplex.
Immediately I was accepted to SMU. The evening program has lower standards than the full time program, and I was well qualified. They offered me the maximum non-competitive scholarship, which was 50% tuition. What I didn’t realize was that it wasn’t negotiable. Texas responded next, with a 1/3 scholarship, which I used (in combination with their in-state discount) to try to get SMU to up the ante a bit. “Nope, there are two full scholarships, here’s the application form”
Spoiler alert, I didn’t get one.
Finally was UVA, who were obviously unsure whether to admit me. From them, I received a very late “are you still on the market?” message well after I had accepted SMU’s offer.
So, SMU was the choice, and the evening program was the way I was going to do it. This is probably my biggest regret from the entire period, because while I ended up where I wanted to be, the journey was very costly financially and otherwise. Texas would’ve ended up cheaper, would’ve let me enjoy school, and would’ve been a much happier experience than I had at SMU, in hindsight. On the other hand, there are some things that can only be learned through pain, and I’m grateful for what was learned.
SMU law school was approximately $45k per year for 3 years (cost is the same for the 4 year evening program). Adding on some tuition inflation, books and ancillary costs, and I had estimated the total cost at $165k. Subtract out $70k in scholarships, and there was a $95k bill that needed to be paid over 4 years.
We needed to free up roughly $25k a year to cash flow law school. Not easy, but not impossible on around $90k a year. Just a bit of focus and a bit of sacrifice, and we come out 4 years later with minimal to no debt and a biglaw job making a zillion dollars.
So, how did we end up with a quarter million dollar hole 3.5 years later? Well, I’ll bullet point it so that it doesn’t turn into a 5 part article. As Dave says, there’s plenty of stupid going on here.
- We decided to “save money” and buy a house November 2013. The down payment was the tuition money for spring 2014.
- My wife quit her job and took a lower paying job in spring 2014, reducing our income by about $10k
- I quit my job in summer 2014 and took a job in a law firm, making more per hour, but technically working part time, meaning thaty income was all over the place
- Wife began traveling regularly to run half marathons, usually at $750-1000 a pop
- I gained 70 lbs my 1L year eating restaurant and fast food because I couldn’t be bothered to pack a dinner
- Wife got fed up that her car kept breaking down and demanded a (used) new car ($22,000) in Feb 2015
- I was spiteful and got rid of my older and jankier car to buy a (new) new car ($32,000) in May 2015
- I took some non-law classes summer 2015 that weren’t covered by scholarship
- I quit my law firm job in April 2016 to work for the company I ended up at.
- I accelerated my degree program by a semester, which increased the cost, but not the scholarship
- I spent a summer (2016) in Palo Alto California making good money and blowing it all on a mortgage in TX plus living expenses in CA
- Wife took another pay cut to get out of a bad job into something she liked better, at the cost of it being a part-time job
- I worked an unpaid internship in Fall 2016 because nobody wanted to hire a law student for a single semester just to have them jump ship after 3 months
- We moved halfway across the country on our own dime to a higher cost of living area, and bought a house that was nearly twice as expensive as our first house, but a worse house overall.
- Obamacare (*spits*) didn’t allow us to charge some pregnancy Dr visits to insurance because of a mandatory two week delay between when we got our new address and when we could get insurance in VA. This cost us over $1000
Obviously, a lot of the story is skimmed over here, but there’s plenty of emotional baggage that we still hold about that time in our life. A lot of growth happened, and I had to find my voice in the relationship.
Walking into the office of my new job in March 2017, I had a boat anchor around my neck, and my wife and I had just come to terms with the size of that anchor. $255k non-mortgage debt. $180k student loans, $50k cars, $25k credit cards. My wife was making about $15k a year, and I was making 10x that, so at least we had a big shovel, but, to be frank, I didn’t trust that my wife could sustain the intensity required to dig us out of the debt. An ultimatum resulted. Get on board, or prepare to have every single account shut down. Thankfully, it didn’t come to that.
There was no one decision that sent us off the deep end. Sure, the choice of school was the closest to that pivotal choice as we encountered, but our fate wasn’t sealed until years later. Looking back, it was the times of hopelessness where our fate was sealed. Those days where I angrily fumed because I couldn’t. find. the. words. to make my wife understand how much I hated what we had become. When we were talking past one another and feeling like there was no way out except to go our separate ways. I so badly wish that I could go back to that person and tell him to grow a pair and be the leader his wife needs him to be. Say the hurtful things that need to be said. Do the uncomfortable things that need to be done. Death may be by 1000 cuts, but we could’ve avoided years of sacrifice by cutting the crap and being honest with one another.
We racked up the debt on the back of “I deserve” and “I earned it.” There were plenty of “I’m sure we can afford it” and “I can’t do without it”. More than a few “I just don’t care anymore” and “she’s not the only one who gets nice things”. The debt was an emotional mess, racked up based on how we felt, with barely half an eye to consequence. My wife was oblivious and I was impotent. A flawed relationship had a catastrophic
Next time, we start in the bottom of a seemingly unscalable hole. I’ll talk through the tools we used to get positive traction. Namely, our monthly budget and our debt snowball tracker.