How I turned $25,000 of debt into $25,000 of assets in 9 months

Call it stupidity or poor planning, but at the age of 21, just weeks after graduating from college, I wound up $25,000 in the hole – despite finishing college debt-free. I was stressed out and depressed, feeling like my world was collapsing. Nine months later, I had a positive net worth of $25,000.

If you’ve been in a state of financial scarcity, feeling like the world is caving in on you, this story is for you. It’s not easy to keep your spirits up when it feels like you’re sinking in a hole. But you should know that by taking advantage of your unique gifts, and with the right mindset, you have the ability to turn your situation around in a totally miraculous way.

On the morning of July 25, 2007, my cell phone was ringing, and it was a number I didn’t recognize.

“Hello?”
“Is this Mr. Alex Wu?”
“Yes, speaking…”

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It was my bank calling. They were following up on an email they’d sent me that morning. My car insurance payment for $190 was due to come out of my account that day. My bank balance was only $160. But because I’d been a punctual customer up until that point, and they were sure this was a mere oversight on my part, they’d waive the usual insufficient funds fee, and gave me until the next day to bring in the money. Otherwise, things wouldn’t be pretty for me.

I had $40 in my wallet. I handed over $30 to cover the payment, leaving me with $10 in my pocket and $0 in the bank until my next paycheck. There were credit card bills due in the meantime. It would be fair to say that I was stressed out over my financial situation.

I asked myself, “Alex, how did you end up in this mess? You fool! They make TV shows out of people like you! You’re a smart guy, raised by immigrant parents who are experts at penny pinching, you should know better!”

It was barely a month after college graduation. It should have been a happy time for me – I’d received two gold medals for top academic performance, I was accepted into the graduate school of my choice, and between scholarships and support from my parents, I had graduated debt-free. But a mere week after graduating, I sank into debt – about $25,000 worth. How?

I really badly wanted wheels as a college student. Now that I had graduated, I felt I was old enough that I deserved to have a car. One morning, I biked to a car dealership to test drive a few cars. I fudged my income as a summer research assistant (I said my monthly income was $2,500 when I was really making $1,500) in order to convince them I could afford the payments. A few days later I walked out with a set of keys to a shiny new Honda Civic. And a piece of paper that committed me to pay off $22,907 in debt by making a $410 payment every month for the next five years.

Before you conclude that I was an idiot, let me say… “That’s not all!”

Just because I bought a car I could barely afford didn’t mean I scaled back on spending in other areas – I had a credit card balance of about $2,000 at the time, for a total of nearly $25,000 of debt.

It only took a few days before reality kicked in, and I started feeling pangs of regret over what I’d done. I experienced severe bouts of depression, stress and anxiety. I even entertained taking my own life. I had five years of payments to look forward to. Five years! I’d be paying for my mistakes until I was 27!

Why didn’t I just sell the car and work on cleaning up the mess? I had pride issues. And the reality was that even if I sold my car at that point, I’d be left with a “gap” of $5,000 between what I owed on the  car and what it was now worth on the resale market, and I would have to assume that as debt. That is, if anyone would lend me money at that point. I’d be making payments with or without the car, so I figured I may as well hang on to the car.

Following the advice of teachers of the Law of Attraction, I stuck a sticky note on my bedroom door on which I wrote “$25,000″. That was the sum of money I wanted to manifest into my life, to pay off my debts and put my mind at ease. My roommate simply rolled his eyes after I explained the sticky note. Even I thought it was a pipe dream.

My parents graciously stepped in to pay my credit card bills until graduate school started in late August, 2007. At that time, my scholarships would kick in, and I’d have a cash flow of about $2,500 a month – enough to pay the rent, groceries, car payment, insurance, books and tuition. That might sound like a good thing – but in fact, I was feeling trapped. I no longer wanted to start a Ph.D. in economics – I had had enough of school – but I had no choice but to continue. If I didn’t have the income from scholarships and financial aid, I wouldn’t have money to make payments on my debts.

I seriously considered quitting graduate school, and even filled out and signed the withdrawal forms. I would move back home with my parents, get a minimum wage job at the local grocery store, maybe even declare bankruptcy and start over again. That would have been the easy way out.

Bank balance in September, 2007

I stayed in graduate school – thanks in part to advice I received on Steve Pavlina’s forums. But I was not a happy camper. The first few weeks of grad school were an incredibly difficult time. I cried nearly every night, sometimes in the grad student office when everyone else was studying.  I owe a lot to the patience of my parents, friends and classmates in their attempts to counsel me. I didn’t see how I had a very bright future to look forward to, but I knew intuitively I had to stick with the path I was on.

Towards the end of September, I saw a few rays of hope.

My university had an Economics Drop-in Center, a large room filled with tables and chairs where undergraduate students could drop in to get help with their course work from graduate students. Most of my grad student classmates were assigned to work shifts in the drop-in center as part of their TA duties, but I wasn’t.

One afternoon I visited the drop-in center to check it out. My classmates who were working there were swamped. There two of them and ten students seeking help. I immediately sat down at a table and began tutoring a young woman waiting in line for help. Instinctively, I knew that I’d enjoy tutoring, just as I knew, going into college, that I’d enjoy studying economics even though I didn’t know what it was.

In fact, I really did enjoy helping that young woman on that day. For those 20 minutes, I forgot that I was supposed to be a depressed, debt-ridden grad student. When we were done, I could see relief on her face. She asked me when I’d be back. I told her I wasn’t assigned to work there and that I was only trying to relieve my overwhelmed classmates – but pledged to return the next day.

She brought two friends with her the next day to see me for help. I showed up at the drop-in center for the next few days like clockwork, working on my own time, because I enjoyed it, and the students really seemed to benefit from the help. I was frequently asked when I’d be back, and I’d keep promising to return.

On the way to the parking lot one evening, one of my classmates asked me why I was donating so much of my time, tutoring students for free.

“I enjoy it,” was my reply.

“Yeah, but you’re not being paid for your time. It’s not fair to you. You should be charging them for your services… at least $20.”

That was a novel idea.

I was a shy guy and struggled with the idea of asking people to pay me for my services.

Still, as a loyal reader of Steve Pavlina’s blog, I reminded myself to keep an open mind and adopt an abundance mindset.

After that exchange with my classmate, every time a student asked when I would return to the drop-in center, I proposed to tutor them privately, outside of drop-in center hours, for $25 an hour. The next day, three out of five students took me up on my offer – and a new enterprise was born.

Of those initial three students, only two returned for a second paid session – but I kept volunteering and pitching my services in the drop-in center, and I soon had a handful of regular students who paid me for my services on a weekly basis.

I wasn’t making a lot of money at first – maybe $100 a week for four hours of work – but it added a lot of breathing room to my stretched budget. I felt an incredible sense of flow – I was delivering a service I felt very happy doing, and I was doing it well. My students were evidently very happy too – within a month, I had a full weekly schedule of 15 regular students, keeping me busy most days after class. It wasn’t long before I raised my prices to $30, and eventually $35 an hour, with higher rates for students seeking ad-hoc lessons before exams.

I was in demand, and I was happier tutoring than I had ever been at any job I’d ever done. It didn’t feel like working. I soon had the problem of being booked up the wazoo – I was doing sessions late into the evenings, and on the weekends. It was clear I couldn’t fulfill all the demand in the market.

Towards mid-year exams in December, I had an idea.

I was receiving way too many calls and emails for private tutoring for me to handle – but what if I taught many of them at once, in the form of a group session? I sent an email to all my students, as well as those who inquired about tutoring, announcing that I was doing a group study session for the December mid-year exam in freshman economics. I would charge $75 a head, and signed out a room that could accommodate 35 people from the economics department. I offered students a discount for every friend that they brought with them, hoping to fill all the spots.

Bank balance in December 2007

When all was said and done, 26 students showed up for my first-ever group study session in December 2007, netting almost $2,000. Between the study session and all the tutoring I was doing on the side, my bank account was looking a lot healthier than it was in September.

You can probably guess where this story is headed. I kept tutoring and doing group study sessions for the rest of the school year. Unfortunately, my grades suffered terribly during this time, but my department showed me a lot of mercy by granting me a marginal pass. On paper, I have a Master’s degree in economics, but I think of it as a Master’s in running my first business.

Bank balance in April 2008

In April 2008, I ran a study session that was attended by over 120 students. I had to hire help to man the doors and take money for this session. I had never before been so nervous in my life as I was before that session. Nor had I ever felt so accomplished when it was over. On April 30, 2008, the last day of the school year, I had enough money in the bank to pay off my car loan. Not only was I effectively debt-free, I was in fact $25,000 out of the hole when you counted the money in my PayPal account that I hadn’t yet transferred. Problem averted, and lesson learned.

Why am I sharing this with you?

When you’re in a low financial vibration, it’s easy to adopt a scarcity mindset towards money. You start watching every penny that goes out the door like a hawk. You feel resentful that things like food, clothing and gasoline cost as much as they do.

But your scarcity mindset won’t get you out of debt and into abundance. You’ll have to step over those feelings of scarcity and tap into a feeling of flow, where you’re delivering value to others in a way that you enjoy. I wrote “$25,000″ on a sticky note, thinking the Law of Attraction might be a magic way to make the money appear out of nowhere. But the way I actually manifested the money was by sharing my unique gifts with others – speaking and teaching. I did it in a way that others were willing to pay me for, and I helped a lot of students do better on their exams.

Teaching a group study session before a final exam

The way out of scarcity is a joyful outflow of the services of your unique gifts. You’ll be doing lots of work, but it won’t feel that way. I spent many nights tutoring students until 10:00pm. My jaw ached from talking all day, but I woke up the next day ready and rearing for more action.

If you’re sinking in debt, it’s natural to be stressed, and even depressed. But to find a way out, go within and ask yourself – who am I, and what would I enjoy doing for others? It may take time for you to arrive at an answer, but the time is going to pass anyways, and the result will likely be well worth the effort

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