Anyone in debt knows the feeling all too well. The feeling of hopelessness. The feeling that no matter what you do, it’s not enough. No matter how fast you move, it’s not fast enough.
There are plenty of inspirational stories all around us, everyday. I never thought I would partake in this amazing experience of sharing my story in hopes of inspiring others. Without further ado, here is my story of how I paid off $37,000 CAD ($27,633 USD) in student loans and credit card debt and saved over $25,000 CAD ($18,671 USD) in just 2 ½ years. Mind you, I did nothing special or extra in terms of income. I had a full time job with a salary of about $47,000 ($35,102 USD).
TIP - No matter how big your debt is, or how dire your situation, keep your goal in front of you and the finish line will be closer than it appears in the beginning.
The moment was all too memorable. It was the first time I felt truly afraid of the future and had that deep pit in my stomach which signaled trouble. Making a salad for dinner, it hit me like a train. Realizing I had about $20 left in my bank account and my next paycheck was still days away, I started to cry. I was 24 years old.
At that time, I was renting a condo with my boyfriend. When I was moving out, I had about $40,000 in debt, consisting of both student loans and credit cards. Oh, and absolutely no savings of any kind. This didn’t scare me. I was young and invincible, or so I thought. We lived paycheck to paycheck, spending money left and right. I was hanging to a promise from him, “Don’t worry, buy whatever you want, my business ideas are almost a reality and then we’ll make a lot of money”. Of course looking back now, I wish I could smack myself!
A year later, after a 6-year relationship, he decided to leave the country and pursue his business dreams elsewhere. I was left alone, with our dog in a condo which I couldn’t afford. With no other options, I moved back to my parents’ house, having given the dog away to my now ex-boyfriend's family. Completely heartbroken with no plan on how to keep living, I slumped into depression.
There are huge differences from my past to my current life.
For example, taking the bus. This was so hard to get used to as I used a car in the past. Can you imagine, with all my debt, I actually considered buying a car? I even considered moving out again! When I hear people are in debt and are doing silly things like this, I remember back to thinking the same way – and I wish I could hold them back and ask them to slow down and think. Really think! Of course, it’s easier said than done.
TIP - The expression "Sleep on It" has huge meaning and benefit behind it. Don't ever make decisions out of haste or from being emotional. Always give it a few days to reflect and think on the decision. Come to a sensible decision which will not hurt you in the future.
After this wave of emotions passed, I realized I couldn’t afford my old lifestyle. I started to think about how to get back on my feet. I knew I wanted to move out again, but paying debt AND renting was just unreasonable.
At this time, my debt was:
- $29,000 Student Loan
- $8,000 Credit Card
I can’t really say what inspired me to pay off all my debt as I just decided to do it one day. But it was a good solid plan, a goal, and it felt amazingly refreshing. So I went full steam ahead.
The first 6 months I tested the waters. I was thinking about how to do it the best way.
The first thing I did was write down my priorities.
Priority 1 - Pay off all credit card debt.
Credit cards have the highest interest rate and I was throwing money into the wind. Any money I had left all went to credit card debt.
Priority 2 - Pay off tuition loans.
This number was massive. $29,000 just seemed so unreal. So I decided to put this number to the side for a minute.
Priority 3 - Start saving money.
I didn’t want to just pay off debt and have no money saved. I wanted to pay off debt AND have money at the same time. This was largely due to saving for a down payment. Having no savings whatsoever, I had to start. I knew I wouldn't be able to purchase anything anytime soon, so I had a lot of time to invest my money and wait for it to grow. I decided to participate in my company’s stock share program. In other words, invest. Every paycheck, I allocated 20% to this program, and in 6 months, my company bought shares worth the amount of money my 20% saved.
Priority 4 - Stop spending money unless it's absolutely necessary.
I stopped completely. No more coffee, no more movies, no more anything. I stopped going out to lunch with my co-workers and friends. It was a shock to be honest. But it was such a dramatic action plan, that I loved it. I wasn’t going to tip-toe around my debt anymore, I was going to crush it head on, at top speed, and not give it a minute’s rest.
By this time, I had amazing friends at work including two ladies who were deeply knowledgeable about money and savings. I talked to them every single day about debt and my progress. Through them, I became much better about my money. I realized that I cannot rent again as renting was such a waste of money and I should save to buy my own property.
Now that I had my priorities, it was time to set goals and timelines. Using a simple Excel spreadsheet, I figuredout how long it would take me to pay off my debt completely. This is what I used to pay, bare minimum:
Starting to work my plan
After applying my new plan for 6 months, I ended up with the snapshot below. You can see debt is a bit lower, but seeing that $4,557 from stock investment just blew it out of the water for me. I can say now, that was the light in the darkness.
It may sound a little obsessive, but every single morning, I would log into my online bank accounts and look at my numbers. Watching them decrease bit by bit and dreaming of the day when I would be debt free put a huge smile on my face. It set the tone for the rest of the day and motivated me to work hard at everything and be grateful for small wins.
Six months later, I paid off my credit card debt and now have a good amount in investments. Never in my life have I had money saved for retirement, but there it was, My first retirement contribution! Retirement, however, was very carefully planned. I contributed $3,000 and the Government sent me a tax refund of almost $2,000; which I immediately used to pay towards my tuition debt. You have to be smart like that, always thinking about what you can do to get little wins.
Again, I felt amazing. I never had any savings my entire life, and now I was sitting on over $15,000!
At this time, I was still discouraged by my tuition debt I had left. The number was just so big and felt like it was decreasing so slowly. Of course, it was due to all of my savings attempts and paying off my credit card debt. Still, there it was, weighing in at over twenty thousand dollars.
A Book That Inpired
What I did next was read Magic by Rhonda Byrne. This step helped me battle two things: my depression and my debt. This book truly helped me with both. It has daily exercises that I did. In the end, they helped me appreciate everything I had in my life. Instead of being upset about spending $70 on a phone bill, I have learned to be grateful for the service being provided. My negative attitude has turned positive and I am happy every single day.
TIP - Do whatever you have to do in order to be happy again and tackle your problems with a positive attitude instead of resentment or anger. You will see a huge difference in how you approach your goals.
July 2013 would be the last time I contributed to purchasing stock. With $20,500 saved, I felt that I had a good amount saved and would hopefully grow by the time I was ready to buy a property. And I was now getting restless to pay off my tuition debt that remained.
In January 2014, I contributed just $650 to my retirement savings account in order to break even. At this time I decided to go fully back at paying off my tuition debt. I knew that come summer, I would be done!
TIP - Make sure to reward yourself for your huge efforts in life. That goes for everything you do. Not only is this good for you, but it also gives a chance to reflect back and see what lessons have been learned to ensure you do even better next time.
Enjoying my reward
In June of 2014, I bought an all-inclusive vacation package to Cuba in celebration of my successful efforts. My plane was leaving on a Friday morning. I remember sitting at the airport, looking at my last little bit of debt and clicking the “transfer money” button for the last time and watching that number become $0.
I was now debt free.
It was surreal.
I was sitting in my chair, and I was debt free. I had debt since my first year of University, and here I was, an adult, with over $20,000 invested in the stock market along with money in my retirement savings account and debt free. Going on a well deserved vacation that I paid for by myself. I had advice and support from my two co-workers, but no one gave me money to help out. I had paid for my own education and owed absolutely nothing to my parents.
Once again I felt invincible! This time, however, it was reality and not make belief.
To sum up everything that helped with my success:
- Action Plan – has to include date of when you’ll be debt free. Do the math now. It also has to include a budget where you show how much you will allocate to debt payment, fun, food, transportation, etc.
- You have to WANT it! This was huge for me. I am very good at achieving my goals. I proved this to myself through paying off my debt.
- Be ready to change your lifestyle. Stop spending money! Period! Only the bare minimum!
- Support – you need to tell someone what is going on so they can support you everyday. Also, make it someone who knows about debt and can give you financial advice along the way.
- Positive Attitude – you have to stay hopeful and be grateful for every day that you get closer to your goal. For this, I recommend you read Magic by Rhonda Byrne.
- Financial Adviser – I didn’t do this, but you can visit your bank and speak to a Financial Adviser. It’s free, confidential and you’ll learn a lot of interesting things.
Lastly, I wish that parents would prepare their children better for their financial burdens. Maybe suggest postponing university until some money is saved instead of going into debt. More tips here. Schools could also do a better job at it. I remember taking Accounting and Finance courses in university, but those were of course for Business. There needs to be more LIFE courses. This is the main reason my co-worker and I launched Luana Co. To help educate.
Are you ready to finally take control of your finances? Let my budgeting spreadsheets help!
Just fill out the form below and I'll send you the link to get the same exact budgeting spreadsheets that I use each month!
Included in the workbook:
- Monthly budget form
- Breakdown of savings form (for your sinking funds)
- Overview of your financial plan
I've been using these same forms since August 2011 and have grown my family's net worth 500% tracking our money using these forms!