How I got into debt … and out of it
In May 2006, I graduated college owing over $20k in student loans and credit card debt. I had absolutely nothing saved, and I was living with my parents. I was 23 years old, and it was downright depressing.
What did I spend my money on? Well $14k of my debt was my student loans, and I had maxed out my credit cards on stupid things like clothes, concert tickets, trips, etc. I was stressed out all the time, because I literally had no money to my name. I could barely make my minimum payments on my bills.
For the first few months after college, I was just getting by, making minimum wage working part-time at a drug store. As my classmates were starting to land their first jobs, I was receiving statements from collection agencies. It got to a point where I honestly couldn’t even afford to take the bus, and it was so humiliating having to ask my boyfriend at the time to lend me the money. He couldn’t believe I didn’t have anything to my name in cash, or in credit. He was nice about it and lent me the money, but I know what he was thinking, and I felt awful. That’s when I knew I had to change. I want to become financially independent so I don’t have to live my life relying on someone else to bail me out.
I needed a life change, and as scary as it sounded, I decided not to hide from my debt any longer. It was horrifying having to actually open up the bank statements that I’d usually just ignore (and throw away), and after carefully calculating how much I owed, I was in shock. I had no idea I owed so much, and I knew my first course of action was to make a budget and stick to it.
I had decided to move home in 2004 because I couldn’t afford to keep my apartment, pay all the minimum balances on my cards, and go to school at the same time. It was a great decision, because instead of spending $650/month in rent plus utilities, I was only being charged $150 including utilities. Then there was my lack of a budget. I was regularly spending $100+/week in groceries for myself alone, and I was going out and partying with my friends every weekend. That had to stop. And let me tell you, it was really hard. My friends weren’t as supportive as I had hoped they would be … but I kept on with my new lifestyle. I became a coupon clipper, and only bought what was on sale. I also quit partying and found alternative ways to have fun for free.
My next course of action was to get a full-time job.
In June 2006, I landed an entry level job with a government agency. It wasn’t what I was trained to do, but it was a job. My take-home pay was about $2100/month, so I decided to earmark $1,000 of that income towards debt repayment. I opened up an RRSP, and started putting money into an Emergency Fund. I also started to save for a condo down payment. Each of those accounts got $50/month. It wasn’t a lot, but it was a start.
By October, I had eliminated my credit card debt and vowed never EVER to keep a balance on my cards again. There’s nothing worse than those outrageous interest rates they charge!
So it was onto my student loans next. All $14k of it. That much money was intimidating as hell, and I knew I needed to adjust my priorities. So, I sold my car and bought a scooter. It was a little drastic, but drastic times called for drastic measures. Not only did my insurance drop from $80/month down to $15, but I only paid $5 to fill up my scooter every week. It was a great decision, and yes I missed my car (and it sucked having to ride in the pouring rain), but I knew it would be worth it in the end. I saw the BF with $450 car payments every month, and I was so glad I didn’t have anything like that to deal with. I also implemented a very strict budget on myself. But that still wasn’t enough. I needed to do something more extreme – so I started applying for a new job.
Miraculously, in mid-November, I landed a great opportunity in my line of work with another organization. It was a one-year maternity leave position, and although it wasn’t a permanent thing, it would give me the mid-level experience I needed within government. I also started a part-time job, and was able to step up my debt reduction to $2,000/month!
It was around this time that I really started counting my pennies. I literally threw every last cent I had at my debt. I kept within a $30/month dining out budget, and never let my groceries creep above $25/week for my share (I lived with my BF at the time, and we split the groceries evenly). I also learned little tips and tidbits on how to save money on the little things. I got a ton of heat from people about being too “extreme” about my budget and not having a life because they thought I was afraid to spend money … I guess everyone has their own way of dealing with debt, but the way I saw it was: I got myself into debt, so I didn’t deserve the niceties I was so used to spending on myself until I got myself out of debt. It seemed fair to me, anyway.
Throughout this process, I started reading personal finance (PF) blogs and articles online. I found it hard to relate to my friends in real life because they didn’t seem concerned with personal finance or paying back their debts. They just didn’t understand why I was so stuck on saving money, and often made fun of me for it. I was the “penny pincher” of the group, even though I didn’t feel deprived of anything at all. So, needless to say, it was inspiring and uplifting to know there were other people like me out there who wanted to change their lives.
The PF blogosphere was so welcoming and inviting, and I felt so inspired through the actions of others that I decided to start my own little PF blog. It really helped me become accountable for my actions, and I quickly made online friends who were so encouraging and supportive. To this day, I still think creating my blog was one of the best decisions I’ve ever made.
On May 11th, 2007 I became debt free. What a wonderful feeling! I still can’t believe it. Now, when I get my pay cheques, I don’t owe money to anyone but myself, and it feels great! Not only did I eliminate my debt, but I have established a pathway to my future, and I know that my dream of financial independence is going to become a reality.