A Harvard MBA Pays Down $101K Of Debt

by John A. Byrne on

Joe Mihalic with his parents at his graduation from Harvard Business School

But what allows him to maintain this entertaining and often addictive narrative of what he calls “the walk to debt freedom” was his extreme goal. The challenge resulted in sacrifices that few of his classmates could ever endure. He gave up all dinner dates and didn’t go to a single movie. He stopped contributing to his 401K plan, decided against going home for Christmas and missed his friends’ parties and weddings. When he went to bars with friends, he carried a flask with booze to mix with his purchased Coke. He shared a NetFlix account and refused to buy a single article of clothing.

RENOUNCING PRICEY DINNERS FOR ‘CHEAP DATES’ OVER COFFEE & BAGELS

One of the more amusing aspects of his tale concerns his transformation from being a dating free spender to a “cheap date.” Renouncing his costly drinks-dinner-and-dancing routine, Mihalic started inviting women to coffee. He recounts a date with “Lindsey” over coffee and bagels during an afternoon. Initially, at least, it didn’t go well.

Wrote Mihalic: “I was actually enjoying myself until Lindsay started dropping bombs about three quarters of the way through the date. We had started talking about the subject of dating, and she told me that she was looking for somebody between 34 to 38 years old. I’m 28, and so is she. That was super awkward, and her remark just sort of hung in the air for a few seconds. She also admitted she was dating a doctor, but she qualified it by saying that things probably wouldn’t work out with him.”

Never mind, thinks Mihalic. He rationalizes the experience, saying “She’s a cool chick, but she told me that she eats out for every meal since she doesn’t cook. That shot up some huge, bright red flags blowing in the strong breezes of caution. Not because I want a girlfriend who can cook, but because she’s practicing a flipping expensive little habit, and believe it or not, I’m actually looking for the value of frugality in a woman I date.”

HIS SACRIFICES INCLUDED RENTING SPARE BEDROOMS TO STRANGERS

To make extra money, he sold his second car and a motorcycle, rented his spare bedrooms to strangers on Craigslist, and started a side business doing landscaping work. Quickly, he chipped away at his debt. To start, he liquidated his IRA account for $8,000, sold stock worth $14,000, and used about $3,000 of available cash to wipe out one loan. Within seven months, he managed to make his final payment and rid himself of all his debt in March of this year—three months ahead of his goal.

His fanaticism to quickly toss off the debt albatross has its roots in a relatively modest upbringing, despite having a father who is a successful executive in the auto industry. “I come from a family that respects the value of money–almost to a fault,” he explained in one post. “While money never appeared to be tight, it never got thrown around, either. My mom bought my clothes at Kohl’s. If I wanted name brand, I had to pay for it myself. My mom spent her Saturday mornings clipping coupons. Every single Saturday evening–without fail, no exaggerations–we went to mass followed by dinner at Olive Garden, Red Lobster, or some similarly priced restaurant.”

One anecdote is especially telling. “My dad is extremely careful with money, and he has gone to lengths to try to instill that value within me,” the Harvard MBA wrote. “It took him two weeks and a couple of trips to K-Mart before he finally bought me a bicycle when I was five. When I outgrew that, he paid for a second bike a few years later. On the car ride home after the second shopping trip, he told me that that would be the last bike he ever paid for.”

‘I NEVER FELT FAT AND HAPPY AND WAS ALWAYS WATCHING MY BACK FOR THAT TAP ON THE SHOULDER THAT SIGNALS THE BEGINNING OF A LAYOFF’

After he graduated from the University of Michigan with a degree in business in 2005, he went to work as a supervisor in a factory in Austin. “I decided the bonuses and raises of my blue-collar staff so I knew how little they made and I saw how many of them were living paycheck to paycheck,” he wrote. “In addition, the factory was constantly under the threat of being outsourced and off-shored. Between these two influences, I never felt fat and happy, and was always watching my back for that tap on the shoulder that signals the beginning of a layoff.”

He concedes now that a shift in his lifestyle occurred during his two years in the MBA program at Harvard. “At HBS, $100 dinners for one person in downtown Boston are a standard affair,” he says. “Nobody thinks twice about taking an international vacation–they just go. I remember a friend told me she was going with a group of students to Oktoberfest for the weekend. I asked her what bar she was heading to. She laughed at me and told me the bars in Germany–she was going to the actual Oktoberfest–for the weekend!”

1 2 3
  • David

    Rushing to pay off 3.13% interest loans? That is a bit extreme and probably would have been better used on his mortgage. Nice story though. 

  • Guest

    This guy made some counterproductive financial moves.  Even if the interest rate was 10%, you would still want to contribute the max for your 401k match before paying off debt.  Having 0 debt is emotionally satisfying and all, but he could use some additional tips on personal finance.

  • Graeme Harrison

    Great Story, well told, with lessons for all!
    Graeme Harrison (HBS MBA ’79)

  • Sonavm

    The best story I’ve ever read!!

  • buoy-slayer

    not the sharpest tool in the box if only making 100 clicks, I’d stay in bed lmfao!

  • Guest

    Keep in mind he matriculated B-school with roughly two years of work experience with a $52K pre-tax salary givining him minimal opportunity to save.

    Someone with 4-5 years exp making $65-$70K (the year before they matriculate) who has been somewhat responsible will have more personal resources to tap during B-school.

  • Dc111263

    I think he made a great decision to pay off all of that debt.  It would have taken him 10 years to pay it off if he just paid the minimum payments.  I believe it was the smartest move he’ll ever make in his life!

  • Shirleyaschen

    He really didn’t do much damage (not contributing to his 401k while he was paying off his debt).  It was only for 7 months.  Now he has even more money with which to invest because it is not going to student loan payments.

  • http://www.facebook.com/palmer.muntz Palmer Muntz

    “Student loans are a strange animal,” he reasoned. “Unlike a payment towards a car loan or a mortgage, a student loan payment doesn’t go towards something that is benefitting me in a direct way.”
     
    Huh?!  He doubled his salary by earning an MBA and yet his student loan didn’t benefit him in a direct way??  Seems like it should be easier than that for him to connect the dots. And lest anyone feel sorry for him, it appears a good chunk of the $101,000 in student loans he borrowed went toward expenses beyond just tuition and basic living expenses while he was in grad school. He likely could have gotten through his MBA with far less debt if he had been self-disciplined, then his extravagent lifestyle after graduation was just a continuation of those habits formed while at Harvard.  But perhaps he’s learned his lesson now. 
     

  • GGt2

    So, he had $10,000 in disposable income every month? And it took him two years to figure out he should direct more of it toward paying off massive debt instead of buying a second car, a huge 3-bedroom house, a motorcyle, and god knows what else? He clearly didn’t even need to launch those side-businesses; he was just taking away work opportunities from people who probably didn’t already have $100,000/year day jobs. Am I supposed to feel like I should be following his example?

  • Liz

    He calculated that he’d pay $42,000 extra in interest over the life of the loans.
    Where in the world did you get 3.13% interest?  There are many different kinds of student loans available and there are different kinds of loans offered at different schools and to different types of degrees.  He borrowed $25,000 with 3.13% interest, and I’m assuming that was the cap amount for that loan.  Lucky him, the best interest rate I could get in 2008 when I started grad school was with the Stafford, 6.8% interest.
    Almost $70,000 of his debt was thru Stafford, both subsidized and unsubsidized (I’m guessing he didn’t qualify for subsidized loans the first year?), which is 6.8%-7.9%. 

  • SM

    I thought that quote was strange as well. The only thing I can think of is this: when you pay off your mortgage you then own the house. Same when you pay off your car loan. But when you pay off your student loans there isn’t this sense of “owning your education” because you already have the education and the diploma in your hand. I hope that makes sense. Maybe someone should leave a comment on his blog asking for clarification.

  • Filippova T

    I could tell that having business education you need to be smarter then purchase everything after being graduated.
    Good example for many! 
    I could add: in countries where no credit cards exist people are really smart to live using cash only.Without Harvard education but without bright future also. ;-)

  • Jake

    I’m confused why he had to ask his roommates for the rent early. I read the month 7 progress report a few months back when he originally wrote it and he didn’t mention needing to do this. I’m guessing he probably spent too much on entertainment per usual and couldn’t make his rent payment for the following month.

  • Holly
  • Smi_josepha

    Well, he has gotten the attention he was looking for.  I would never hire a clown like this.  Went to Harvard and couldn’t do the math until 2 years later?

  • moc

    you all are running ur mouth as if u ur selfs dont
    have debt. I dont care about his financial history i give im major respect for
    doing something that most american dont even have the discipline to do. So to
    all of you haters talking as if you graduated from Harvard can go some were
    with ur debt infested lives

  • Barf

    so, you’re saying…despite having NO obstacles to overcome (other than his own privalege and over-spending habits), this young, straight, white, male, harvard-business-school-educated, guy made it??

    shocking!

  • Lol

    how does the single guy who makes 6 figures pay off his harvard grad school debt?!

    i’m sure he’s on the verge of homelessness and helplessness that so many of us are facing.

    I. NEED. TO. KNOW!!!

  • thekiyote

    It says he got the rent money early from his roommates so he could pay off his mortgage.  However he collected the rent, it most likely fell after the mortgage payment was due.  He probably went for broke to pay off his student debts, leaving him short for mortgage payments.

  • Mhyder1

     What you say is true but I think he was more concerned about the $42,000 than emotional satisfaction. An now he can contribute to his 401k as much as he likes. I think it was a good move.

  • yolo

    He did have an obstacle, his car got towed costing him ~$200.

  • http://twitter.com/lokeshjain2008 lokesh

    I think i have wasted my time reading his nonsense talk. 
    now, i have to think about reading,
    he is such an ass

  • Jimdetejas

    Great story and love the lessons of making sacrifices to accomplish a meaningful goal! Amazed and disappointed at haters and their negative comments… Jealousy is so ugly.

  • deez

    no youre wrong dude

  • The Jesus

    His examples of roughing it kill me… going to dinner at
    the Olive Garden, Red Lobster and other similarly price places… shopping at
    Kohls and his father only buying him 2 bikes and being an executive at an
    automotive company… that is not roughing it at all… My father had passed
    away when I was 5 and my family moved here from South America. I remember as a
    5 year old not asking my mother for a quarter for the machines outside of the
    supermarket cause I didn’t want to put her in a bad situation when it came to
    food or rent. I know this guy was trying
    to portray a meager background… but I would have loved living in his shoes…
    although he did make his father sound like a jerk… Also, he was purchasing a
    house and had a bunch of cars… If I was him, I would have paid off that loan much
    quicker and it probably would have been half that to begin with.

    Also, unless his 401K and IRA was invested in a dogs, he
    should have been making 3 to 7% or more… then to pull that money out, they
    charge you tax and a penalty in excess of 10%… I understand he wanted to
    satisfaction… but it came at a much larger opportunity cost… I give him respect
    for getting into Harvard… but I just don’t know what they saw in him.

    Also, just so all of you know, all MBA cost about $100K ±10K
    including living expenses. Those that
    say they are $60k aren’t including living expenses. So, if Harvard gave him a $50k and he still
    had 100k in debt, then spent 50k over necessary living expenses.

    I cannot give this dummy respect for getting himself in that
    much debt to begin with. Also, he doesn’t
    realize it but he does sound very privileged.
    At least he’s honest enough to let it show!

  • lissa

    Good Day
    I am Mrs (Vera) from United state of
    America, i stayed in Alabama, and i have a broke
    up business, until i found this company email
    who help me to gain a loan for business,, and
    now i want to used this short medium to
    congratulate the above company for the fast and
    safe money
    they loan to me without any form of
    collateral, i loan 500,000USD from the company
    to save my business and lots more, i saw their
    mail on the internet, everyone always give
    testimony for what they did, so i quickly
    contacted them and they all did everything for me
    without stress
    and my money was sent to
    my account 24hrs later, i was surprise and feel
    glad, now i now have a standard business
    control agent who help me, now i will advice
    those who need urgent loan to contact her at
    Lissaperryloancompany@gmail.com he is a very Good
    man and I know that he
    will help you immediately..

  • johnson leeh

    To whom it may concern,

    I am Mrs Jessica Vergas,i and my husband just got a
    loan from this company called MISS MONICA HOUSE OF LOAN INVESTMENT without
    we being scammed.i am so happy that after all this years we can still
    find our feet back again.i am so happy that now that we do not have a
    job we can find a way to live again and i want to tell every body that
    if you need financial help you can contact them via email at
    missmonicahouseofloan@gmail.com.

    Thanks for listen, may God help you too.

    Regards,

    Mrs Jessica Vergas

  • James Mack

    Attention! Do you need a loan? Do you have bad credit? You need money to pay the bills? You need to start a new business? Do you have unfinished project at hand due to poor funding? contact us via mail backubaloanfem@hotmail.com

  • Mark Berry

    leo enterprise is
    a global enterprise who is currently rendering assistance to various
    organization, cooperate firm,business owner,and various individual who
    are in shortage of capital to kick up business .we also rendering
    student loan ,housing loan , student car loan .we are enterprise with
    business oriented to server d globe better that is why our loan is
    little interest as low as 3% .it is because of this medium company and
    organization are rushing to our door step .we also finance capital
    project and sale of agricultural equipment .

    interested organization ,firm and individual should contact this email leomarkloanenterprise@gmail.com here is an application form to fill and submit to the email below

    name of applicant
    sex
    age
    country
    telephone no
    amount
    have you apply for loan before
    amount apply for before
    company own

    Email leomarkloanenterprise@gmail.com

Partner Sites: C-Change Media | Poets & Quants for Execs | Tipping the Scales