The Five Personal Finance Lessons $50,000+ of Debt Taught Me

By Todd Kunsman

Financial Independence

Published on

Updated on

Having over $50,000 in total debt taught me a few personal finance lessons that I value today.

These lessons were also some driving factors in my current financial independence pursuit as well.

Of course, I don’t encourage you to go into financial debt to learn some lessons of your own. I certainly would love to have that $50,000+ I paid back.

But I also learned a ton by having this debt over the last few years, which I applied to my own financial education. I truly think it was critical in where I am today and how I view personal finances in general.

Without this debt, who knows If I would be so enamored with finances today or where my path would have gone.

So while I was never excited about having debt to pay back (who is?!), it also gave me the foundation to be more successful financially.

Firstly, Accumulating $50,000 of Debt

Debt is not necessarily something to be excited about and it can hold you back from starting a family, buying a home, and generally enjoying your life.

And having debt can add a lot of financial stress and pressure on you, which impacts your overall physical health, mental well-being , and relationships (spouse, family, etc).

In a nutshell, debt sucks.

At the highest point, I had just about $50,000 in total debt at once to payback. Here’s what the breakdown looked like for me:

  • Student Loans ($28,XXX)
  • Car Loan ($23,XXX)
  • Credit Card Debt ($1,XXX)

I’m sure you are looking at that and are saying wait, that definitely is over $50,000. True, but I bought my brand new car in 2011 when I already paid about $4,000 in student loans off.

So in my lifetime, I had over $50,000 in debt, but at one time I had closer to $49,000.

While it is a lot of debt, I was also fortunate in a few areas.

I did not owe a lot to my student loans as I had gotten good scholarship money, commuted to school, and my parents (and myself) helped pay part of the tuition. Additionally, the interest rates on my student loans varied from 4%-6%, not terribly high but that still adds up.

Lastly, I was also fortunate that I’ve generally been quite responsible with credit cards, never really racked up a lot of debt on it. This was a good thing since my credit card interest was 28%!

The Five Personal Finance Lessons $50,000+ of Debt Taught Me

The Personal Finance Lessons Having Debt Taught Me

While I’m not particularly excited that I had this amount of debt, I learned quite a bit and it was a piece of the financial puzzle that motivated me to make changes.

Do I regret having this debt? At this point in my life, I do not and here’s why.

Having Debt Taught Me About Prioritizing

Having five figures of debt opened my eyes and taught me more about prioritizing my money. Meaning, I quickly learned how to decide where my money would best work for me and where I should (or shouldn’t be) spending it.

The thought of having this debt for a long time was not something I wanted to deal with. So many times, instead of spending money on the latest material things or going out, I learned when to keep my money in my pockets.

I never really been one to lavishly spend, but with not making much money a few years back and having that much debt, I had to prioritize even more.

This is something that I’ve carried with me to this day, which I think has been beneficial to where I am financially now.

Where prioritization plays in to my personal finances currently: Where I spend my time with finances, prioritizing my spending habits, where money goes with investing, order of paying bills, etc.

The Importance of Being Organized

Similar to starting to master the skill of prioritization, I also refined my organization skills by having this debt. This isn’t too say I was a complete disorganized slob when it came to finances, but I also wasn’t spending time on it or had a good personal system.

With this debt, it taught me to be more organized with payments, paperwork, financial statements, etc. At first, I would just remember to make a minimum payment and throw any mail or other paperwork in a “junk drawer.”

You know, everyone has those “junk drawers” filled with random stuff. And it’s totally cool, but not a place for important financial information when it comes to bills or paying debt.

It took only one month for me to forget to send in a payment to realize I need to get organized – FAST.

I have never missed a payment since. And, I have all documents organized in folders and I keep track of payments. This carried with me for all personal finance and investing related items as well.

That You Can Save Money And Pay Debt

You might have read this post that I wrote a few weeks back, about a conundrum of paying off debt or saving money. In the beginning, way back in 2010-2011, I was really trying to figure out what would make the most sense.

Do I aggressively pay off my debt without saving much? Or should I trot along with minimum payments and try to rapidly save and invest?

However, after a few years and my own vested interest in personal finances, I found that doing both is possible and certainly okay.

Is it the right choice for everyone? Certainly not and you’ve seen other stories where someone paid off six figures of debt in two years instead of saving or investing much.

It’s totally okay!

But I learned that it is entirely fine and possible to do both. I focused on paying the high interest debt first (Credit Card), then focused on my highest monthly payment which was my car loan.

This allowed me to pay off my car payment two years early, reducing my total debt. And by learning to pay debt and save, I’m now over 95% done with my debt and saved/invested just over $80,000 in under five years.

Note: My car loan had a 5% interest rate, which was similar to my student loans. However, the monthly payment was also larger and wanted that money back for saving or helping pay extra towards the remaining debt. Right or wrong, that was my mindset.

Budgeting Might Not Be Fun, But It Helps

I’ve always been one to sort of wince when it comes to spending a lot of time on budgeting. In fact, for years I never had a personal budget or bothered with one.

Mostly for a few reasons:

  • I hated spreadsheets at the time
  • I thought I could manage it all in my head
  • It bores me to think about it or look at it
  • And I quite honestly had the, “I’ll worry about it later” mentality

Currently, I’m still not a hardcore budgeter or look at my personal one very often. But I do have one that I start over each year and look at it maybe 1x a month.

Point being, even if it’s not fun, you don’t like spreadsheets, or you don’t think it’s important to do, it can be very helpful. When my student loan payments kicked in, I didn’t care about a budget for a few months.

But not long into, I realized I need to create one and stick to it.

This helped prioritize and stay organized! (See above). It also helped me visually see where my money was going, where I could cut expenses, and why I needed to generate more income to get rid of this debt and save more.

To Avoid High Interest Debt At All Costs

If you look back at my numbers from above, you’d notice majority of my debt is on the conservative interest side. Still, 5-6% adds up over time but I was lucky that I did not accumulate much high interest debt on a credit card.

I did carry a balance back before 2014 which was consistently just over $1,000 for a while. But I remember always trying to stay away from using my credit card too much.

However, seeing how much interest was paid to my student loan debt, taught me how much worse it could be with credit cards.

Having student loan and car loan debt kept me focused on the future to avoid more bad and high interest debt. The thought and numbers scared me and still do today.

This didn’t mean I avoided using my credit card altogether, but it made me respect how and when I use the card. Ensuring I’m able to pay if off right away. If I don’t have the cash to pay for something in full on the card, I don’t use it.

A simple and maybe obvious lesson, but valuable nonetheless.

The average American will pay $1,183 in credit card interest and 43.9% of families hold credit card debt in America. (Federal Reserve)

Final Thoughts

There you have it, the five personal finance lessons I learned from having debt. I’m sure there are a few other subtle items I learned, but these stood out the most to me.

Do you have debt or did you have debt? What personal finance lessons did you learn from it? Did your debt help your financial education like it did for me? Let me know in the comments.