Almost Fearless

Extreme Debt – Pay or Stay: Day 17 of 30w30d

This post is part of 30 Ways in 30 days to Redesign Your Life and Travel the World. This series seeks to give you the practical, real world steps you need to take to get from wherever you are, to exactly where you want to be– traveling the world and living the lifestyle you want.


30 ways in 30 days, debt reduction, real estate, choices, traveling or travelling

As I was preparing this series, a surprisingly large number of people emailed me with their stories of extreme personal debt.  The question is always the same: what should I do, it’s essentially hopeless, I don’t want to stay but I can’t afford to go?  On the surface, it’s easy to blame the borrower, but not always. But what if you’re debt was for a noble cause?  A business plan that didn’t work out.  Medical expenses you couldn’t avoid.  Or a $100,000 graduate-level education? Should you be stuck for the next 5, 10 years working a job you don’t like, putting you’re life on hold?

I think the sternest of advisers would say: “Travel? Ha! You have to pay off your debt first!”

If I was to advise against paying it off first, someone would say: “Oh Please.  What are they are they going to do, file bankruptcy and pass on their bad judgments to consumers who actually pay their bills?”

I know this because last year I wrote a post called, 8 Things I Wish I Knew When I Was 22, wherein I suggested that young people fresh out of college could defer their student loans in order to travel for a year or more (among other things).  Of the 150+ comments it received, there was a number of people who practically spat on such an idea.  Have fun now!  Pay it off later!  Irresponsible! How dare I even suggest it.

The truth is, if I was indeed 22 again, I would do just that.  I’d defer my loans ($12,000 of them at the time, not much I know) and travel as long and as hard as I could.  If I had $100,000 in loans, I’d probably do the same thing.  But that’s just me.  It’s knowing that I would be able to make six figures if I wanted after I returned and the hindsight to know that I would have missed less in those first few years of work than I would gain traveling.

It comes down to a judgment call.  Obviously it’s best to pay off your debt first.  But with extreme debt – $100,000 or more, even the most frugal saver could take up to five years to get caught up.

Formulating Your Own Personal Gut Check

I won’t presume to tell anyone what’s best, that’s up to you to figure out.  Despite all the varying advice out there, there really is no right way.  Will you tell the guy who left his massive debt behind, scrounged up $5,000 to start a business in Central America and ended up paying everything off faster than if he had stayed– that he was wrong?  Or will you look the other way at the post-doc who wanted to follow her passion and ended up living overseas, working her dream job, but unable to afford a house, to get married,  or to have kids, when the time came?

1.  You have to know what you’re dealing with. If you don’t already, you should know what your total debt is and what it costs you per month.   So that $100,000 law school degree is a monthly payment of $1200, but $500 of that is interest.  The second part is as important as the first.  You need to calculate what it costs you to travel.

2.  What will this cost you? If you’re planning to travel, say for one year, then the cost to you is your interest ($500 from the case above) per month.  In this case, that’s $6,000 for one year. That’s how much more debt you’ll have in a year if you defer payment.

3.  Is this too much? You don’t need a fancy table to tell you.  If you see the number $6,000 and you say, “ah well that puts it into perspective, I can deal with that”– then you have your answer.  If you see $6,000 and you say, “heck no, travel for one measly year is definitely not worth a $6,000 increase in debt”– then you too have your answer.

How to Pay Off Debt

First, get professional help, if you can.  I used the methods below when I was cleaning up my credit report post college recklessness and as I paid off my debt before travel (that’s right, we took a year to pay off everything, including some old expenses from a short-lived business before we started traveling).

1.  Get your credit reports from all three bureaus.

2.  Call everyone you owe money to, tell them you are struggling to pay and see if you can make some arrangement.  (Just do it!)

3.   If your credit report is a big fat mess, sit down and write a letter and contest everything on your report.  Debts are bundled and sold.  You could be getting dinged from one $100 doctor’s fee you never knew about, not once but three times.  From the doctor, from the collection agency he sold it to when you didn’t pay, and finally from the next collection agency who bought your debt from the first.

4.  Start paying everything with the lowest monthly rates you get get from your creditors, so that you avoid no payment fees or more dings to your credit.  If you have extra, pay down the smallest balances first.

5.  Saving money comes last. Even if you invest your savings, chances are you won’t out earn the interest on your debt.  Pay everything off and then save.

6.  Work the pyramid.  I don’t know where I first heard about this method, but every debt-guru seems to use it these days.  Pay as much as you can across your debt.  When a bill gets paid off, apply that amount to the next smallest bill.  Keep working through your debt until you’ve paid everything off.

Options for the Debt Weary

So yes, paying everything off is ideal, but in the back of your mind, you just know that you are not going to do it.  That’s okay, it’s not the end off the world to be in debt.  Sure it sucks and sure it’s better and cheaper to pay it off first, but it’s not a zero-sum game.  It’s not pay it off or die.  Here are some interim steps you can take if travel is priority now:

1.  Just pay the interest. Assuming you are living within your means now, (if not now is the time to start), then planning to pay just the interest on your debt will allow you to travel without putting you further behind.  (From our example above, that would mean saving or earning an extra $6,000 during your year of travel).

2.  Try to negotiate lower rates for what you can and pay off some of your debt. For instance, one reader wrote to me and mentioned her $130,000 student loans, but she also had $12,000 in credit card debt.  For her, maybe it makes sense to eliminate the high interest credit card debt before traveling, but leaving her student loans in deferment.

3.  If your deal is high student loans, you may be able to alleviate some of your responsibility and still travel at the same time (depending on the type– are they Stafford or Perkins loans?  Are they private loans?).  I would check with your alumni office for programs, but you might also consider the Peace Corps and other volunteer positions abroad that help pay down debt and let you see another country.

4.  If you have a large mortgage, it’s better to sell at a loss, than to go into foreclosure. If you are in the process of foreclosing, you might want to demand to see the original loan documents.  This has worked for many homeowners to delay or stall completely the foreclosure process as it’s required by law that they have the original signed documents in order to collect on your loan.  With the way home mortgages were packaged, sold, bundled into securities and resold, there’s a fair chance that you’re current mortgage company bought your loan as a part of a large bucket of loans and the paper work has long been lost.

If I Didn’t Say This Before…

The best thing to do is to become debt free.  Sure there are options, but it’s postponing the inevitable.  If you can, pay it down.


Christine Gilbert

I’ve been dragging my husband around the world since 2008 always with the promise that, “Yes, Drew there will definitely be hammocks there.”



  • I think if the person is in a well paying job and piled with debt, they’d be wise to defer travelling and stick it out. Meanwhile, if they’re flipping burgers (no offence – you do a great service) then perhaps it’s time to hit the road and re-evaluate.

    Travel can often – as I’m finding – have a negative effect on your credentials as well as your credit. If I was in $10,000-50,000 debt but earning $40,000 a year (I’m not sure what a good US salary is) then I’d wait.

    Consolidation is almost always a good thing, but one things for sure – the debt will be waiting when they get back, and can leave a big black mark against them. It’s such an individual thing.
    .-= Ant´s last blog ..England: Til I Die =-.

  • Mountains of debt? Run!

    Debt is what keeps us all tied to our boring jobs. It’s what the capitalist world thrives on. Skip out on your debts and go travel? God forbid Visa might go belly up.

    Screw the debts. Travel.


    • Chris,

      CNNMoney is currently working on a story about extreme debt. We are looking for someone who is in debt and who is not paying their bills right now.

      Are you in debt, or do you know anyone who is? Have they decided to forgo payments to do things like travel? If so, we’d love to speak with them.

      Feel free to shoot me an email at

      Thanks so much,

  • If you’re a native English speaker and have a degree you can travel while paying off your debt. When I graduated, I wanted to go to China straight away, but I also had a large student loan. So, I decided going to teach English in Korea instead for a year. When I was there, I was super-frugal and paid off my entire loan in a year and saved some. They year after that I went to China. I enjoyed my year’s experience in Korea, except for the teaching part. Met some nice people and could observe an interesting culture. Now I’ve been in China for nearly seven years. If I had come to China straight after graduating I would still be paying my loan off now.
    .-= Gordie Rogers´s last blog ..Do A Personal Inventory. =-.

  • once again a great post. Our goal is to lease our home, but that could change by the time we leave the US and relocate to Thailand. Our house is currently in an excellent location and we feel that leasing or selling, either way by 2010, we’ll be OK. Selling we anticipate making at east 50K after all fees(conservative estimate). Typically, we would want to get more out of our home, but given our goal of being free of debt, this is the way to go. This leaves us with the student loans only. Our goal is to be free of that debt as well. So while we are in Thailand, we plan on living frugal and earning $$. We have less than 10 months towards this goal and commenting on this site and this series is a constant reminder of where we want, need to be in 2010. Reading this series is also a regular reminder to be consistent with our plan. Thanks so much!!
    .-= @GotPassport´s last blog ..Our Beloved New Orleans Series Part 1 =-.

  • Never seen someone with the guts to say she’s defer as long as possible just to travel. That’s what I’m doing right now, and although it would be a tremendous relief if I managed to pay off my debt, or at least be in the process of doing so, I know it would take a ridiculous amount of time… years I want to spend on the road.

    @Gordie Good idea. Korea, Japan, and Taiwan are great places to get the money you need and still travel.

  • “5. Saving money comes last. Even if you invest your savings, chances are you won’t out earn the interest on your debt. Pay everything off and then save.”

    I remember coming across this advice when I began trying to develop a debt/savings strategy for my RTW trip. That must’ve been 5-7 years ago. Scary how time flies!
    .-= Dave´s last blog ..Travel Video – Matt’s Dancing Finale =-.

  • We took the time to pay off our debt first and have spent the last year saving money for the trip. All we have left to do is sell our house and major possessions in the spring (and just breaking even on that would be a miracle) before leaving next year.

    It took us a few years to get ready for this trip, but for me the mental transition from suburban consumer to traveler takes time and I’m glad I’ve had the chance to go through it. And knowing our debts are paid leaves us free to enjoy the trip and not worry about a mess when we get back.

    That’s just my 2 cents – definitely the slow way to go, but you will find some unexpected perks as you discover a whole new way of seeing the world before you even leave home. Thanks for a great post on a sticky subject.
    .-= Betsy Talbot´s last blog ..Putting yourself out there =-.

  • […] Almost Fearless: Extreme Debt – Pay or Stay […]

  • Pay off debt first would be my plan. Travelling is what I love but could’nt escape thinking about the mountain of debt left behind instead of enjoying my time off.

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