This is the fifth installment of our series Into the Black, where we hear from people who found ways to pay off serious debt. This week we talked to Jason Lowery, a blast and ballistics engineer who plotted out his finances 25 years in advance in order to pay off his student loans and his mother’s credit card debt.
Jason Lowery, 29, Dayton, Ohio
Past debt: $60,067.06
Source: Student loans
Past job: Blast and ballistics engineer, Department of Defense
Past salary: $33,408, but $43,162 after taxes, thanks to military stipends and tax credits
Current salary: $69,240.97 after taxes
Current net worth: $92,000
The original plan was for my parents and me to split the cost of college 50–50. But then 2008 hit, and all our plans went to shit.
I went to Baylor, which was a very expensive education. Tuition and fees alone cost more than $40,000 a year. And with housing, books and food and whatnot, my education cost about $250,000.
Luckily, I was responsible for only about $80,000 of that because of my scholarship with the Air Force Reserve Officers’ Training Corps. They covered a significant portion of my room and board and paid me a monthly stipend that increased $50 every semester.
In college, I was the Poor Kid. Baylor was full of these rich kids from oil money driving around in Hummers, while I drove an ’87 Oldsmobile Cutlass — this rusted-out beater with a broken window. My friends didn’t like me because I didn’t contribute to their bar tabs. But they all had internships with this local engineering firm, pulling in $1,000 a month, and I couldn’t work there because of my ROTC duties.
I graduated in spring 2010, and officially started my job with the Air Force in January 2011, working as a blast and ballistics engineer at Tyndall Air Force Base near Panama City, Florida.
That’s also when I realized just how bad things were with my mom.
My mom was always finding ways to game the financial system. And she was good at it until, suddenly, she wasn’t.
She was constantly opening new credit cards to earn points bonuses and shuffling money around to take advantage of their different interest rates. From home, she would day-trade stocks. But she wasn’t able to pull it off after the housing and stock markets crashed in 2008. She had borrowed against her mortgage and retirement accounts, and found herself over-leveraged and more than $20,000 in credit card debt.
She asked me for money. Her plan was to have me pay off one of her loans so she could take out another loan and use it to play the stock market. Needless to say, I turned her down. I had just started my first job after college, and I was like, What? I’m a kid and my parents are asking me for money. This is backwards.
Not coincidentally, that was the same time I set about paying off my debt. I looked at finances as an engineering problem: If my finances are an engine, how do make them run at optimal performance?
One of the advantages to being in the military is that, for your first 10 years of service, your pay and promotion rate is set by Congress. So I knew exactly how much I was going to make over that time, and made conservative estimates for the following 15 years. I plotted that income out on a spreadsheet and included every expense I would incur. I knew what the next 25 years of my finances looked like down to the penny, and knew I would have my debt paid off by March 2014.
Another advantage to the military is we get a lot of tax breaks, such that our net incomes are greater than our gross incomes. For example, my pre-tax income for 2011 was $33,408, but my net income at the end of year was $43,162 — the post-tax equivalent of a civilian earning $55,000.
We received a $1,200 a month housing allowance to live off-base, and a $239.96 “subsistence allowance” for groceries, both of them tax-free. (That’s why our net incomes are so high.) How we spent those stipend was entirely up to us, so I thought, I’ll live as cheaply as possible and pocket the difference.
I found this old cat lady who lived downwind from a paper mill and rented out the room above her attic. It was terrible, but it cost only $550 a month (including internet), and I was pocketing more than half my stipend.
My goal from the outset was to not fall in love with anyone before I paid off my debt. I only ate out on dates, which happened less than once a month. Socially, I did lots of free stuff — ultimate frisbee with my co-workers, playing drums in my church band, hanging out on other people’s boats. My furniture was all hand-me-downs. My bed was donated to me by a friend from church and I bought a $30 bed frame from Walmart. I used cardboard boxes for a nightstand and had a $100 futon for a couch.
Avoiding lifestyle inflation was easy since everything was already accounted for. By the time I got that promotion, I had effectively budgeted and spent that money already.
In October 2012, I struck a deal with my mom: I would pay off her $20,000 in credit card debt if she would pay off $20,000 of my student loan debt, which had a much lower interest rate. We swapped debts, essentially, so she was putting $10,000 less toward my education than we had previously agreed to.
I didn’t mind, though. I was doing fine. In March 2013, I was re-stationed to Dayton, Ohio, but avoided income tax because I was technically still a Florida resident. That October I started a six-month tour in Qatar, and received combat pay — no federal income tax, a $224 a month dislocation bonus and no housing or food expenses.
My mom died of a stroke in early 2014, a month before I had paid off all her debts. I had intended it to be a surprise. So when it finally did happen a month later, it was more a dedication to her than the present I had hoped it to be. It was somewhat anticlimactic, though. I had planned for that day for years, so I wasn’t overcome with joy when it finally occurred. It was more a calming feeling.
After I paid off my debts, I set a new goal: $100,000 in savings by the time I’m 30. I have $92,000 already, so I’m right on schedule. My longer-term goal is $2 million in effective assets by age 43, at which point I’ll retire from the military and start earning a pension. I like the idea of becoming an entrepreneur, maybe a financial coach, and being my own boss.
I always saw paying off my debt as a no-brainer. That’s why I had no problem being the poor kid in college or living in squalor right after. There’s a Muhammad Ali quote that I subscribed to: “Suffer now and live the rest of your life as a champion.”