After graduating from college and moving to New York City to work as an editorial assistant at SmartMoney magazine, David Weliver found himself $80,000 in credit card and student loan debt. It took him roughly three years, but Weliver became debt-free after making his last payment in September 2009.
He's now married with kids and living in Portland, Maine, where he runs MoneyUnder30.com, a personal finance blog aimed at helping twentysomethings transition from broke college students to young professionals.
U.S. News chatted with Weliver about climbing out of debt, developing a saving mentality, and maintaining good spending habits. Excerpts:
Tell us about your journey into and out of debt.
It's the classic story of signing up for credit cards when you're a freshman in college and not knowing anything about money and using them as free cash. Back then, I didn't have a rent payment, and the minimum payments start so small. You borrow $5,000 and you think "this is fine," so you borrow more. When I graduated and moved to New York, I was rapidly adding to [my debt] because I was trying to make it in New York on a very small, entry-level salary, and the cost of living was exceeding what I was earning.
I was trying to live how I had always lived growing up, when my parents supported me, and that wasn't flying on my income. So I was using the credit cards more and more. It wasn't until a couple of years down the road that I left SmartMoney and I had this epiphany that I had to change my ways.
What sparked that epiphany?
It was a kind of bottoming out. I was always good about making payments and keeping my credit score healthy, but I had a month where I couldn't make the minimum [of about $1,500 a month] anymore. That's what set me in motion to reverse the trend and pay it all off.
What strategies did you use to turn things around?
It wasn't like there was any one thing that I was overspending on. It was more that I just kept living like I was earning twice what I was. It wasn't an extravagant lifestyle--it was just a lifestyle that I wasn't able to afford at that time.
So I did a couple of things. I worked at Starbucks nights and weekends while working a full-time job. I also put a lot of energy into my career and into finding a higher-paying career path. I went into sales, which is not something that I wanted to do forever, but I did it to earn more money when I needed to. Being able to have a few months of bigger payments and see the balances drop really motivated me to do more.
The other thing I did was look for ways to reduce big expenses in my life. There weren't a whole lot of them, but one of them was my rent. I moved back to Massachusetts because New York was too expensive for me. I moved into a smaller place, with a bunch of roommates, for about half the rent that I was paying.
We can drive ourselves crazy trying to cut out a lot [of small expenses], like trying to bring our lunch to work. If you're really good about it every single day, that might add up to $50 or $100 at the end of the month. If you can take on a roommate or move back home with mom and dad, that adds up to a lot more.
If you could go back in time, what would you do differently?
If I could have developed the saving mentality in high school, I think I could have changed a lot. My parents are very opposite with [how they treat] money. My dad is a saver, but my mom is a spender. She used credit cards and just bought the things she wanted. In a lot of marriages, I think the woman's personality ends up winning out. I did what my mom did rather than what my dad said.
As soon as I started earning a little bit of spending money, I spent it all. I think if I had learned to save, it would have colored my whole relationship with money, and I don't think I would have gotten in the situation that I got into. Plus, I would have had all that savings 15 years later.
Eighty thousand dollars is a lot of money to pay off. Did you ever feel overwhelmed?
I had some health issues that came up. They were basically related to chronic stress. I think part of it was that I kept [my debt] a secret. My wife--my girlfriend at the time--knew about it. But apart from that, I kept it a secret from my parents until I started blogging.
Since you write the Money Under 30 blog, what do you think are the biggest money mistakes that people in that demographic make?
I think one of the biggest that I've seen is not creating financial independence from parents sooner. I'm almost 32 now, but from what I understand of readers, people are staying with their parents longer and longer, and they've delayed [their] careers and facing the financial real world.
Don't get me wrong; the economy these days, especially for a college grad, is not great. But even if someone can't go out and get the job they want right away, to begin finding any work and contributing to their financial situation or starting to save for stuff sooner, the better. It doesn't have to be picking the next great stock or putting all of your money into an IRA by the time you're 30;. Just anything--saving a little bit, learning to pay a bill every month, whatever you can do.
What are your financial goals now?
I've gotten married, bought a home, got out of debt, started a family with two kids. So certainly continuing to save for retirement and [my children's] college education. But beyond that, I'm looking for that next lifestyle goal. Is it a bigger house or is it [to] travel? It might be someday upsizing our house a little bit, and in the meantime taking nice trips when the kids get a little bit older.
What are your best tips on Money Under 30 for twentysomethings on how to get out of debt?
I think the biggest thing is to figure out where they're starting from, because people are in all sorts of different situations. If you're fresh out of college [and] don't have a job yet, don't add onto your debt. Minimize your expenses before you have a job. If that means moving home with your parents, do it. It's about doing what it takes for you. You can't compare yourself to a classmate that maybe landed a high-paying job and say, "I can live like that, too." If you're already in debt, it's about making that a priority to get yourself where you have the balance of paying off debt on a timeline you're comfortable with and saving some.
The best feeling after paying off the debt is finally having the savings in the bank, whether you call it an emergency fund or a rainy-day fund or a cushion, so when something unexpected happens--and it always does--you're not turning to a credit card.
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