The Rat Race - Chased the Cheese Right into the Trap

[Crafty]

After five years and 130k dollars, I made an investment that transformed my life—the Tom Brady of investments. I never would've thought $8.50 would have had such an impact. The Millionaire Fast Lane (which led me to Unscripted and then The Great Rat Race Escape ) has changed my entire outlook on everything.

I had my sights set out for the slow lane, scripted path until I was rescued by some random guy on Reddit who recommended TMF . I honestly knew no other way. I am surrounded by people who spent their lives doing the exact things you describe.

I wish I had come across the Reddit post five years earlier, but here we are. That being said, I graduated college in 2020 with an Economics degree and landed a typical rat race job in the insurance industry about a year later.

Since then, I've started my own little E-Commerce thing that I work on after 5 PM. It's still in the early stages, and I know it's definitely not my ticket to the fast lane, but I feel it's what I needed to stop action faking and actually do something. I realized I was in a state of analysis paralysis.

I do have to say, I am incredibly grateful for you, @MJ DeMarco. For all of the time you spent writing these books. For building a community of like-minded individuals who all help each other reach a common goal and for still being active in the community ten years later! I am very excited to be here.

So that's my brief introduction, but I also would love to hear people's thoughts on my current dilemma:
I answered my own question as I wrote this next part, but I figured I would include it anyway, just in case someone wanted to offer some insight into debt.

I'm in the process of refinancing my student loans. They are federal parent plus loans in my dad's name. I was approved for three different terms. The first is a high monthly payment and would have all of my student loans paid off in 10 years. The second is to have a lower monthly payment, but it would take 20 years to pay off the loans. The third is right in the middle of the two.

Do you think it's best to pay down the debt as soon as possible and have less to spend on my business? Or would it be better to have a lower payment, so I have more money to spend on my business?

I know this should be based on my own personal preference and whether or not I can handle the cons of either situation. The higher monthly payment now vs. the debt looming over my head for 20 years. But I have now realized that if I pick the 20-year option, I will have more money to invest in my business now and, at some future date, a life-changing amount of money that I could use to pay off that remaining debt.

Also, I remembered that MJ mentioned something along the lines of after basic living expenses, if it cant be re-invested into the business, then it should go to reducing high-interest debt. I've realized that I could invest the difference between the highest monthly payment terms and the lowest terms into something I feel will increase the bottom line of my business. I feel this would be more beneficial than paying down the debt earlier. Plus, if I don't feel that money could be used for something that would increase the bottom line, I could always pay more than the minimum if I wanted to. I am open to any thoughts and have until April 3rd to agree to the terms.

 

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[MJ DeMarco]

What are the interest rates? And what kind of $$ are we talking about?

Welcome to the forum, so happy to hear the books made an impact in your life.

 

[Crafty]

What are the interest rates? And what kind of $$ are we talking about?

Welcome to the forum, so happy to hear the books made an impact in your life.

I have a 10 year $30k @ 4.5% federal loan already in my name. This one is $300/month

The remaining 100k are in my dad's name which are the ones I am refinancing. I was approved for:
$101,539.42

Years	Rate	Monthly Payment	Total Paid Over Life of Loan
10	3.00%	$980	$117,656
15	3.25%	$713	$128,427
20	3.55%	$591	$141,959

This brings my total payment per month to either $1280, $1013, or $891 if you include the loans already in my name. I can honestly say every time I look at these numbers it hurts my soul

 

[Greg Black]

After five years and 130k dollars, I made an investment that transformed my life—the Tom Brady of investments. I never would've thought $8.50 would have had such an impact. The Millionaire Fast Lane (which led me to Unscripted and then The Great Rat Race Escape ) has changed my entire outlook on everything.

I had my sights set out for the slow lane, scripted path until I was rescued by some random guy on Reddit who recommended TMF . I honestly knew no other way. I am surrounded by people who spent their lives doing the exact things you describe.

I wish I had come across the Reddit post five years earlier, but here we are. That being said, I graduated college in 2020 with an Economics degree and landed a typical rat race job in the insurance industry about a year later.

Since then, I've started my own little E-Commerce thing that I work on after 5 PM. It's still in the early stages, and I know it's definitely not my ticket to the fast lane, but I feel it's what I needed to stop action faking and actually do something. I realized I was in a state of analysis paralysis.

I do have to say, I am incredibly grateful for you, @MJ DeMarco. For all of the time you spent writing these books. For building a community of like-minded individuals who all help each other reach a common goal and for still being active in the community ten years later! I am very excited to be here.

So that's my brief introduction, but I also would love to hear people's thoughts on my current dilemma:
I answered my own question as I wrote this next part, but I figured I would include it anyway, just in case someone wanted to offer some insight into debt.

I'm in the process of refinancing my student loans. They are federal parent plus loans in my dad's name. I was approved for three different terms. The first is a high monthly payment and would have all of my student loans paid off in 10 years. The second is to have a lower monthly payment, but it would take 20 years to pay off the loans. The third is right in the middle of the two.

Do you think it's best to pay down the debt as soon as possible and have less to spend on my business? Or would it be better to have a lower payment, so I have more money to spend on my business?

I know this should be based on my own personal preference and whether or not I can handle the cons of either situation. The higher monthly payment now vs. the debt looming over my head for 20 years. But I have now realized that if I pick the 20-year option, I will have more money to invest in my business now and, at some future date, a life-changing amount of money that I could use to pay off that remaining debt.

Also, I remembered that MJ mentioned something along the lines of after basic living expenses, if it cant be re-invested into the business, then it should go to reducing high-interest debt. I've realized that I could invest the difference between the highest monthly payment terms and the lowest terms into something I feel will increase the bottom line of my business. I feel this would be more beneficial than paying down the debt earlier. Plus, if I don't feel that money could be used for something that would increase the bottom line, I could always pay more than the minimum if I wanted to. I am open to any thoughts and have until April 3rd to agree to the terms.

If you want to get started fast and getting extra income under your belt in the ecommerce sphere, I recommend selling on ebay and Amazon first. It is where the customers are and the best place to start for any ecommerce journey IMHO.

 

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[Crafty]

If you want to get started fast and getting extra income under your belt in the ecommerce sphere, I recommend selling on ebay and Amazon first. It is where the customers are and the best place to start for any ecommerce journey IMHO.

I appreciate your advice! So right now, I have my own site, and traffic is minimal. I've been concentrating on learning more about SEO which I know will help in the long run, but it takes time. But that is a great point, Greg! I will look into how I can list the products on amazon/ebay as well.

 

[Two Dog]

I have a 10 year $30k @ 4.5% federal loan already in my name. This one is $300/month

The remaining 100k are in my dad's name which are the ones I am refinancing. I was approved for:
$101,539.42

Years	Rate	Monthly Payment	Total Paid Over Life of Loan
10	3.00%	$980	$117,656
15	3.25%	$713	$128,427
20	3.55%	$591	$141,959

This brings my total payment per month to either $1280, $1013, or $891 if you include the loans already in my name. I can honestly say every time I look at these numbers it hurts my soul

Think of it this way.

Most of the population has a net worth of ZERO. You're dramatically poorer than all of them right now.

One of the hardest lessons for getting started is learning how to do without. That's one of the endless trade-offs with walking your own path before getting things sorted out. It's been a *long* time, but one of my handful of financial regrets is paying off my school loans on the schedule that was offered. I never even knew there was an alternative back in the day and dutifully mailed in payments for ten years straight. That's just what everyone did that I knew. All of us could have easily paid off the student loans in 3 - 5 years with the right motivation.

My other regret was "buying" a new car (aka borrowing even more money) within six months of graduating. The low interest rate and financial arbitrage and all that other BS discussion about "good debt" comes from people destined to be in poverty their entire lives because they're diddling with credit card points instead of becoming financially independent. Consumer debt is literally the entrance to the lifelong rat trap.

As a recent graduate, you will never live as cheaply as you can right now. It's perfectly fine to live at home, share a place with five people, sleep in a van, whatever while you eat ramen five days a week and put in ridiculous hours. Pay off the loans as quickly as possible (way faster than 10 years) and don't borrow another penny for consumer widgets. If you need money for business investments, get other people to front it and share the profits until you're in a position to support your own deals.

 

[Crafty]

Think of it this way.

Most of the population has a net worth of ZERO. You're dramatically poorer than all of them right now.

One of the hardest lessons for getting started is learning how to do without. That's one of the endless trade-offs with walking your own path before getting things sorted out. It's been a *long* time, but one of my handful of financial regrets is paying off my school loans on the schedule that was offered. I never even knew there was an alternative back in the day and dutifully mailed in payments for ten years straight. That's just what everyone did that I knew. All of us could have easily paid off the student loans in 3 - 5 years with the right motivation.

My other regret was "buying" a new car (aka borrowing even more money) within six months of graduating. The low interest rate and financial arbitrage and all that other BS discussion about "good debt" comes from people destined to be in poverty their entire lives because they're diddling with credit card points instead of becoming financially independent. Consumer debt is literally the entrance to the lifelong rat trap.

As a recent graduate, you will never live as cheaply as you can right now. It's perfectly fine to live at home, share a place with five people, sleep in a van, whatever while you eat ramen five days a week and put in ridiculous hours. Pay off the loans as quickly as possible (way faster than 10 years) and don't borrow another penny for consumer widgets. If you need money for business investments, get other people to front it and share the profits until you're in a position to support your own deals.

Thank you for taking your time to write this up! I haven't thought about it like this before. "you will never live as cheaply as you can right now"- best thing I read today.

Although I do have a shit ton of student debt, I was fortunate enough to have read MJ's books before I went out and bought a new car after graduation. I know A LOT of people who weren't so lucky. I'm also very fortunate to still live at home (and have a girlfriend who agrees with this statement lol) because I am saving a ton of money.

To pay off these loans in 5 years would take around 2360/month, which is close to 75 percent of my take-home pay right now. Something would really need to change if I were to go this route. I will look into what it would take to do something like this. Though I'm not gonna lie, I care too much about my health to be eating ramen five days a week

"If you need money for business investments, get other people to front it and share the profits until you're in a position to support your own deals" - I loved this point as well. My least favorite thing to do is to ask people for money, so this would be tough at first, but I know once I find the thing of great value I can offer people, it will be much easier.

 

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[Two Dog]

Thank you for taking your time to write this up! I haven't thought about it like this before. "you will never live as cheaply as you can right now"- best thing I read today.

Although I do have a shit ton of student debt, I was fortunate enough to have read MJ's books before I went out and bought a new car after graduation. I know A LOT of people who weren't so lucky. I'm also very fortunate to still live at home (and have a girlfriend who agrees with this statement lol) because I am saving a ton of money.

To pay off these loans in 5 years would take around 2360/month, which is close to 75 percent of my take-home pay right now. Something would really need to change if I were to go this route. I will look into what it would take to do something like this. Though I'm not gonna lie, I care too much about my health to be eating ramen five days a week

"If you need money for business investments, get other people to front it and share the profits until you're in a position to support your own deals" - I loved this point as well. My least favorite thing to do is to ask people for money, so this would be tough at first, but I know once I find the thing of great value I can offer people, it will be much easier.

Glad you found it helpful!!

I'm pretty sure giving up 75% of your take home pay will make your life miserable. ;-)

How about starting with the ten year plan plus an extra $10 each month and figuring out how to generate the other $2,350 with a side gig or a business over the next two years? The extra few dollars seem like nothing for now, but it's a huge difference in perspective. It's the difference between doing nothing and earning your first dollar from any kind of business. So few people ever make it that far, but creating money is really just another learnable skill.

 

[Crafty]

I'm pretty sure giving up 75% of your take home pay will make your life miserable. ;-)

LOL, I was thinking that at first but I am trying to keep an open mind xD

How about starting with the ten year plan plus an extra $10 each month and figuring out how to generate the other $2,350 with a side gig or a business over the next two years? The extra few dollars seem like nothing for now, but it's a huge difference in perspective. It's the difference between doing nothing and earning your first dollar from any kind of business. So few people ever make it that far, but creating money is really just another learnable skill.

This is a great idea and I appreciate you for the advice and for helping me work through this!! Sounds a lot easier than it will likely be, but I like the direction