ALUMNI PROFILE
Alumni Tell How To Be Debt-Free by 30
By Shira J. Boss

Karl Cluck '94

Debt, and mounds of it. For many, it's the unadvertised byproduct of a college degree. Combine education loans with daily credit card offers going even to the unemployed and a keep-up culture of dot-com riches and you've got a whole stratum of graduates deep in the red.

Two Columbia grads with just this problem set out to tackle it and published their lessons for debt-burdened brethren in a book, Debt-Free by 30: Practical Advice for the Young, Broke & Upwardly Mobile (Plume, $12 paper).

"We were financial basketcases," says Jason Anthony GS '94, who co-wrote the book with Karl Cluck '94. "Most people in their 20s just have no clue about money. We didn't. For me it was getting one raise after another and sinking deeper into debt."

Not five years after graduation, the two friends had accumulated combined credit card debt of $27,000. Anthony had to turn down an enticing job opportunity because he wouldn't be able to make minimum payments on his credit cards after a 15 percent pay cut, and Cluck had indefinitely postponed graduate school for much the same reason. After they confessed this to each other over brunch one Sunday, they decided to get together and defeat Visa, MasterCard and AmEx once and for all.

"It's not like we were calling each other four times a week saying, ‘What did you save money on today?'" Anthony says of their partnership. "It was like, ‘Let's figure this out, write it down, and compare notes.'"

It took them two years to make their final credit card payments, and by that time they had amassed a do-it-yourself guide to conquering finances in your 20s. When skeptical editors asked what their expert credentials were to write such a book, Anthony and Cluck told them, "We are experts at being in debt and getting out of debt, and it shouldn't take an expert to get your personal finances in order." Especially, they say, when a financial plan in one's 20s is more about balancing earning and spending and not yet about mortgage rates, estate planning or alternative investing.

Young debtors can trace their money problems back to campus, Anthony and Cluck argue, and it's not just the cost of an education that drags students down. "The first thing you get at orientation is a credit card application," Cluck says. "It's accepted that you should go out and buy things you can't afford with the idea that once you get your fancy four-year degree you'll make so much it won't matter."

"It's 20-something Reaganomics," Anthony adds.

After college and graduate school, loan payments can add up to $1,000 per month or more — the equivalent of a mortgage payment, Cluck points out. "That's fine if you want to be a doctor or a lawyer, but not anything other than that," he says. "People so often think of debt as a number, but what it really does is limit your opportunities — to choose a career you love, or go to graduate school, or save for a home — because you're in service to Visa or MasterCard or Sallie Mae."

The temptations to build up debt have grown over the last generation, the authors say. Not only has access to credit become much easier, but expenses have grown and so have tastes. "You need to pay for your Internet provider and cell phone, and people are more label-conscious," Anthony says. "Twenty years ago, nobody in their 20s knew who Armani was. Now there's House of Style on MTV and everyone sees these shows and wants these clothes."

When Anthony and Cluck were getting started on their battle against debt, they say they couldn't find a money book that spoke to them in realistic terms, so they decided to write their own. "We wanted to make a practical guide that people would use," said Anthony. "We don't give any advice that we haven't followed ourselves." They dismiss advice like freezing your credit card in a block of ice so you're prevented from making impulse purchases as irrelevant. "I don't know anyone who's going to do that," Cluck says.

The two examined their own financial records and dug up wasteful spending, like the $19 in fees on Anthony's monthly bank statement or the $1,000 per year Cluck was blowing on taxis. They interviewed many friends — some of them fellow Columbia grads — to illustrate other young people's financial habits, mistakes and turnarounds. One discovery that interested them was the non-correlation between how much money people make and how in control of their money they are. "We found a publicist making $36,000 with perfect finances, but a 25-year-old investment banker making $100,000 who can't pay her credit card bills," Cluck says.

As with most personal finance articles or books, one main lesson is to cut the spending fat: the $4 Starbucks Frappuccinos, for example. Cluck and Anthony use charts and exercises to try to get readers to align spending with values. They tell readers to make a list of things that make them happy, for example, and to concentrate spending on those things rather than on other budget zappers. A few low-cost recipes are included, including one for a knock-off Frappuccino (35 cents per glass, they boast). They cover comparison shopping using the Internet and target bank fees, insurance rates, credit card interest and taxes as money suckers to be tamed.

"When you're in your 20s, most of what you're spending your money on is crap. You're not spending it on a mortgage, you're spending it on CDs and eating out four times a week," Anthony says. "That's bad because you're wasting your money, but it's good because it's easy to adjust and to do without those things."

They both say that axing their debt has lowered their anxiety and opened up opportunities. Anthony, who works for film producers, was able to quit a job he wasn't happy with. And Cluck says that with the economy having turned bumpy and layoffs striking even at Razorfish, the advertising agency he works for, "I'm Zen about it, because I have no debt and I've saved."

Anthony says a recession "could actually be good for this generation. We could get our values in check once we realize that a lot of this boom was dumb luck and funny money."