The First $100,000...

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As I mentioned in an Instagram story last week, I've officially fully repaid my student loans! It almost feels anticlimactic to be done so suddenly with something that's taken a little over six years from when I graduated law school. (But with the paycut I took while clerking, I was only able to make serious payments for five of those years. I couldn't even keep up with the ~6% interest that was accruing to the tune of roughly ~$990/month while I was clerking.) 

Is it funny, or maybe just strange, that I don't even actually know what my total student loan balance was at its peak? Because ~6% interest was steadily accruing on the vast majority of the balance at all times - including while I was in law school and in the months between graduation and when I actually started working - the total balance was constantly in flux. If you've ever noticed inconsistencies in how I've described the size of my initial student loan balance over the years, it's mostly because of this constantly accruing interest. My total amount actually borrowed was different from my balance upon graduation, which was also different from my balance when I started working, etc. etc. I know the all-time high was at least ~$195,000, but I can't recall if it ever actually got much closer to $200,000, or even slightly exceeded it. 

There's a pretty common trope in personal finance-focused online discussion spaces about how "the first $100,000 is the hardest" to accumulate in savings and investments, and that's certainly been the case for me. Heck, because I started with an extremely negative net worth thanks to my law school student loans - and because I took that aforementioned paycut to clerk very early on in my career - it even took a super-long time for me to get to "the first negative $100,000" in net worth!

The timeline for how long it took me to get from one big net worth milestone to another looks like the following*:

• -$190,000 - September 2015 - I'd set aside a small "emergency fund" in cash savings from my biglaw summer associate salary and maintained that throughout my 3L year and the summer I studied for the bar exam. 
• -$100,000 - March 2018 - 2 years, 6 months - Oh boy, this first milestone sure took a long time to get to, mainly because of the delay caused by the clerkship paycut! I did have a larger emergency fund saved after my first year in biglaw - and, as it later turned out, this would be my only year in biglaw - as well as some modest retirement savings. I didn't start maxing out my tax-advantaged retirement accounts until late 2018. 
• +$0 - April 2019 - 1 year, 1 month - Not going to lie, I was pretty excited about getting to "net worth zero" for the first time. 
• +$100,000 - January 2020 - 9 months - For more context, my student loan balance did not drop into the five figures until roughly November 2019. 
• +$200,000 - September 2020 - 8 months - I'm omitting the milestone(s) I've attained after September 2020, if any, because I'm shy about sharing too much detail about my personal finance-related numbers.

I think there are a lot of people out there who have explained how, for them, subsequent milestones after the "first $100,000" each came around with ever-accelerating speed (e.g., in this Instagram post or this one). After all, the stock market's generally been quite strong for almost the entire time I've been actively investing, in other words, since fall 2015. So it makes sense that the investment gains should continue to compound and accumulate faster and faster. 

For me, however, the speed with which I attain new net worth milestones has not, to date, particularly escalated since early 2020. If I did continue to list my milestones - if any - beyond September 2020, it wouldn't really look like it was getting easier for me to attain new milestones faster and faster. 

At this point, as I'm about to talk a bit about my approach to investing and how I balanced loan repayment and investing, I should drop in a quick and important disclaimer before I continue: I'm definitely not a qualified investment professional or financial advisor. Please do your own research elsewhere before making any investment or personal finance management decisions.

To the extent it's odd that the pace at which I hit additional net worth milestones has not accelerated much, part of my issue may be that I hold way too much in cash savings by many standards. I'm quite confident a one-year emergency fund is right for me - unfortunately, I keep seeing more and more evidence that job transitions for more senior litigators like me can take a very long time to pull off - so that part isn't an issue. But I also have cash set aside in addition to my emergency fund, for my share of K and I's wedding expenses and also for my share of a future down payment on a home, which would likely be located in a fairly high cost of living area (though probably not in NYC proper). 

It may also have been... suboptimal... for me to have continued paying off my student loans so aggressively after I refinanced from my original interest rate of ~6% down to 2.6% in 2018. My monthly minimum payment after refinancing - for a 10-year repayment term going forward - was only $1,605/month. At that time, it was clearly a reasonable bet that if I invested the extra money instead of pouring it into extra loan payments, my investment returns would likely have exceeded 2.6%. And yes, that is indeed what would have happened every year since.

I wouldn't say that I actually really regret speeding through repayment, however. Even if it might have been a little irrational of me - at least, after I'd refinanced to the 2.6% interest rate - I just didn't do well, mentally and emotionally, with having that student loan balance hanging over my head. I wanted those loans gone as fast as possible. 

Plus, it was also far from a given that I was going to be able to continue working in the private sector, at a job that sometimes requires me to bill biglaw-like hours, for as long as I have. With my biglaw-ish salary at my current job - taking into account the fact that I'm interested in working for the government in the long term, which will result in a significant paycut - these past few years will probably prove to have been the highest-earning years of my entire career. So I felt like I needed to work to repay my loans aggressively now, because it was only going to get much harder to do so later on in my career. 

I don't think the issue is with my asset allocation, at least. As I mentioned in a post this year about my personal approach to investing, I invest in a mix of total stock market index funds and a target-date retirement fund for when I attain a standard retirement age (2055), all of them fairly low-cost funds with fees of ~0.16% or less (sometimes a lot less). That 2055 target-date fund has roughly 10% invested in bonds and the rest invested in a mix of domestic and international stocks. My total asset allocation is a bit more aggressive than that, with a bit more in stocks and a bit less in bonds. 

* K and I maintain separate finances, so any net worth and personal finance-related numbers I've ever shared are for me only. As I once mentioned - with his permission - in 2016, he's generally a bit more frugal than me. He also stayed in biglaw much longer than I did, and I've briefly noted as an aside in another posts an aside in another post that it only ultimately took him around 45 months to finish repaying a student loan balance only slightly smaller than mine.