Jesse Cramer started his career with “a negative net worth,” he told Insider.
He’d accumulated $42,000 worth of debt between student loans and a car he purchased right after graduating college in 2012. He earned a degree in mechanical engineering from the University of Rochester.
Cramer’s first job out of college was with a software company in Madison, Wisconsin. His starting salary was $60,000, he said: “I remember holding my first paycheck in my hands and thinking to myself, ‘I’ve got all this debt. I know I should be saving for retirement in some form or fashion. I’m also 22 and have a paycheck — I actually want to spend some money, too.’ And I really didn’t know how to balance those different options.”
He decided to make minimum monthly payments on his loans and invest 10% of his income in his company’s 401(k) plan.
Cramer did this for about a year, which allowed him to make a slight dent in his debt and build a small nest egg. But his savings were put on hold when he moved back to Rochester, New York to build on his undergrad degree and get a master’s in mechanical engineering.
Over the next 18 months of grad school, he didn’t accumulate more student debt — he taught undergraduate courses and did research in the mechanical engineering department, which covered the cost of the program. Plus, he earned an annual stipend of about $18,000, which was enough to cover his basic living expenses, he said. But it was impossible to continue paying down his existing debt or save for the future with such a small cash flow.
Cramer wrapped up his master’s degree in 2014 and landed a job as an engineer for a playground company. He worked there for about six months before beginning what would end up being a seven-year career as an aerospace engineer at a company that builds satellite telescopes.
During those seven years, Cramer became debt-free, bought his first home, built up $325,000 worth of investments, and did another career pivot. Today, the 32-year-old works for a registered investment advisory firm and blogs about personal finance on the side. He started his website, The Best Interest, in 2018. Insider reviewed documents verifying Cramer’s net worth, debt payoff, and home ownership.
Here’s how he did it.
Cramer graduated from college with $18,000 worth of student loans. He tacked on another $24,000 in debt after buying a new car, putting his total debt at $42,000.
He managed to secure a 0% auto loan, so he was in no rush to pay off his car. “Luckily, my dad was relatively financially literate and he knew that if he co-signed my auto loan, I would get a very beneficial interest rate,” explained Cramer, who made a $400 minimum car payment each month. “Him co-signing, combined with Toyota’s new graduate deal at the time, meant that I had a 0% interest rate on the car loan.”
His repayment strategy was slightly different for his student loans, which had an interest rate around 5%. Cramer set up automatic minimum payments, but occasionally made additional payments to speed up the process. He liked to keep his checking account hovering around $10,000, which he considered his emergency fund, but any time it crossed that threshold, he’d put the extra money towards his loans. For example, if his account reached $12,000 one month, he’d send an extra $2,000 to his loan provider.
Today, his emergency fund is bigger: about $25,000, which covers more than six months’ worth of living expenses, he noted.
Two strategies helped him stay on top of his payments and tackle his debt: making automatic payments and creating a budget. Most online payments — whether you’re paying rent, a credit card bill, your mortgage, or student loans — can be automated, meaning you can have a certain amount of money lifted from your checking account and sent to your lender. Setting up automatic payments makes it very hard to miss one, as you’d have to go out of your way to cancel the payment.
The second strategy Cramer used was treating his loan payments as “fixed costs” — or, expenses that he must pay — in his budget. “Just like groceries and gas are necessary monthly expenditures, paying down debt was an expenditure that I needed to make sure I had cash flow in my monthly budget to cover,” he explained.
Cramer, who started budgeting and tracking his expenses right when he finished undergrad in 2012, is a firm believer that “you can’t manage what you don’t measure.” Understanding exactly where his paycheck was going — and making sure to allocate a portion of it to pay down his loans — helped him become debt-free by May 2017, just five years after graduating with student loans and buying his car.
Cramer didn’t just think of his loan payments as a fixed cost — he used the same mental trick when it came to saving for a home, and made sure to budget a certain amount of money each month for the future purchase.
In 2016, while still paying down his debt, he added a “down payment” line item to his budget and started saving $1,000 a month for a home. After about two years, he had enough to buy a $96,000 Cape Cod style home in Rochester. He put 10% down, or $9,500, and paid another $10,000 in closing costs, he said.
While he still has a mortgage balance on the property, Cramer views this as “good debt” since he is building equity in the asset. Plus, his home has appreciated by about 30% over the past four years, he said.
Cramer also managed to set aside some of his paycheck for retirement while paying down debt and saving for a home. He already had some savings from his first corporate job out of college, but didn’t get serious about investing until he started working after grad school, he said. In 2014, he set the goal of maxing out his employer-sponsored 401(k) plan. It took three years to do so: “After paying off my car completely in 2017, all of a sudden I had an extra $400 a month. That’s when I could actually max out my 401(k).”
Next, he opened a Roth IRA and started maxing that out. Then, he opened a taxable brokerage account.
“I took the money that had been going towards debt and, rather than increasing my monthly budget, I diverted it to different savings options,” said Cramer, who started his aerospace engineering career making $72,000 and ended it earning about $110,000, he said. After five years of consistently investing between 30 and 45% of his paycheck, he’s accumulated $325,000 (as of April 2022).
His investing strategy is simple. He even calls it “lazy.”
“My personal philosophy is to buy a diverse portfolio of assets that you plan on holding for the long-term with periodic rebalancing as needed,” said Cramer, who used to invest in a total stock market index fund. He now invests in a diversified portfolio built by Cobblestone Capital Advisors, his employer. “I’ve stuck with it during the good times — which, it’s mostly been good times — but then even during the COVID-19 downturn, when my portfolio dropped by about 30%.”
He understands that downturns are part of the process, which is why he didn’t panic when the stock market crashed in 2020, he added: “I was very aware of the way market downturns can work. I knew they were possible, and I knew we were somewhat overdue for one. So when it happened, I didn’t really have too emotional of a reaction. I sat there and kind of watched it like a science experiment unfolding before my eyes.”
Most of his money sits in a diversified portfolio, but he does own three shares of Berkshire Hathaway.
“I really enjoy listening to Warren Buffett and Charlie Munger speak, and owning those shares gives me access to their shareholders meetings every year if I want to go,” he said. “It’s kind of like owning a baseball card of your favorite player. I own shares of two business leaders who I admire.”
Cramer says he’s on track to achieve financial independence, which he defines as having enough money to live the lifestyle he wants without having to work or earn a paycheck, by his mid-40s. He plans to get there by sticking to the same savings and investing principles that helped him get out of debt.
He still keeps track of every dollar he earns and spends. “I do my best to not miss anything and that way I have a complete picture at all times,” he said. “It gives me a pretty low stress, satisfying feeling over my finances because I know what cushion I have, I know what my dollars are doing, and there really aren’t any unknowns.”
His budgeting system also allows him to spend without guilt. “I have money set aside every month for meals out or drinks with my buddies,” said Cramer, who budgets $200 a month for restaurants and bars. “I don’t feel bad about that spending because it’s planned for.”
As for how much he needs in savings to make work optional, he doesn’t have an exact number in mind. Based on the “4% rule” of retirement — which, despite its caveats, can help retirees gauge the amount of savings they need before they retire — he estimates that he should aim to save about $2 million.
“That’s a reasonable goal for me, but it’s very ballpark and I want to leave a lot of wiggle room,” said Cramer, who is getting married in September 2022 and recognizes that major life events like kids could completely change his projections. “If my fiancé and I decide to have kids and it ends up being triplets, which can happen, that’s going to fundamentally change the course of my life.
“So, I’m remaining open.”
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