December 22, 2004, was the day my grandfather passed away. He left me $50,000, which I received a couple months later. Rather than pay off my outstanding $22,000 student loan, I decided to invest the inheritance in the stock market, in real estate and in my career. This proved to be a complete waste of $50,000.
I put half of the money into Wall Street, used about $20,000 to purchase a townhouse in the Poconos, and used the remainder to cover the high expenses of living in New York City, where I was working for a globally recognized consumer product brand.
My idea was simple: build a nest egg through Wall Street, build equity through renting out the townhouse in the Poconos and use the remaining money to sustain myself in New York in order to advance my career.
Wall Street was soaring. The real estate market was at an all-time high and companies in New York were paying entry level college grads less than what it actually cost to live in the oppressively expensive city. What I did was play the game. What I should have done was pay off all of my debt, move back in with my mother and become a bartender, because that is essentially what I ended up doing four years later anyway.
When the 2008 financial collapse hit full force in October, I had already bailed out of the depreciating townhouse, but not before the monthly mortgage payments ate away at my portfolio of stocks and futures. I had to resort to pulling nearly half of my investments just to pay the monthly mortgage and bills. The renter market had dried up, and the housing crisis was in full swing. Then at the end of 2008, I lost my job and was therefore entirely dependent on the remaining money I had invested to survive.
Then a wind storm occurred, and my grandmother needed $12,000 to repair her roof. At that point I completely closed my investment portfolio and used what was left to survive. At the beginning of 2009 I had nowhere to live; I had a car lease I couldn’t pay, and I had student loan payments of around $260 a month. Using what was left of the $50,000 inheritance, I spent $800 to attend a bartenders school in Manhattan, and then I moved in with my mother in Pennsylvania. Over the next three years I would face long periods of unemployment that led to multiple deferments of the student loan monthly payments.
Becoming a bartender actually proved to be the best move for my career. Fast forward another four years later and I had an actual job that paid actual bills, living in an area that I could actually afford. The college degree helped break down some doors so that I could move into the management of bars, thus giving me a viable career.
Currently, I have no outstanding debt except the student loan that still looms over my head with the high monthly payment. Had I paid that loan off when I had the chance back in 2005, I would have avoided all the interest that gathered as a result of several deferments, and I would be approximately $260 richer every month.
As a result of all the deferments, my loan balance is actually slightly higher today than it was four years ago. Most importantly, I would likely still be in the exact same situation I am today, and therefore it would seem that trying to invest and grow my money, rather than pay down the debt, was nothing more than spinning my wheels.