Being transparent with your finances online is interesting. I know it helps to see real numbers which is why I share everything, but there are obvious downsides. Like, all of the times people tell me that they wish they had my income. I can’t help […]
I’ve tried many different spending challenges over the years – not buying clothing for a year, setting up a budget for specific categories, not eating out for 100 days, aiming for a certain number of $0 spend days every month. I can’t argue with the […]
My relationship with debt has never been a resolute one. I’ve made a lot of mistakes along the way. I’m not an expert in personal finance and I still have a long road ahead, but I hope my experiences might help you along your own journey.
I graduated with $130,400 of student loan debt, largely from tuition and living expenses during nine years of my undergraduate, graduate, and law degrees but also from a significant emotional spending problem. Fortunately, I landed a full time position the summer after graduation and was able to start repaying my debt in November as scheduled.
At the beginning of the following year, I began using the You Need A Budget (YNAB) app to track my finances. The plan was to reduce my spending and increase my debt repayment beyond the minimum payments, but at the time I felt that I didn’t earn enough money to pay more. Spoiler alert: I did. Over the course of that year, I tracked every single penny I earned and spent. I never fully embraced the budget during that time, but I was starting to get a handle on what I purchased month to month and that opened my eyes to the amount of money I was letting slip through the cracks.
Step #1: Calculate the amount you’re burning every month (and every year) on interest.
Later in the year, I was coming up on one year since I had started my debt repayment process. I compared my remaining balance and my payments and while I had paid $15,000 over the year, I’d only decreased the balance by $10,000. That’s right, FIVE THOUSAND DOLLARS went to interest.
I guess you could say that seeing how much I’d paid the bank and the government that year just to service my debt was my breaking point. I felt like I’d piled up thousands of dollars in cash and just lit the whole thing on fire. It was a tough lesson to learn, but in a way it’s the reason I’m here now so I’m thankful for that experience!
Step #2: Know when to seek help if your plan isn’t working.
At that point, I finally decided that I’d had enough. I refused to pay the full projected $20,000 in interest over the remaining decade of my repayment schedule. I desperately searched online for ways to decrease debt, and stumbled across two men who would change my life forever: Mr. Money Mustache and Dave Ramsey. I read Mr. Money Mustache’s blog from start to finish, and I listened to the Dave Ramsey podcast every single day.
Reading and listening to podcasts sounds easy – it wasn’t. I had to face the fact that I was a highly educated, adult person who was failing at money. I wasn’t being intentional with my spending and this behaviour was going to keep me in debt for at least a decade if I didn’t do something to change immediately. I also had to face all of the emotions that put me in this situation in the first place – the death of a parent, the feelings of inadequacy and disillusionment during law school, and the fear of taking on a significant amount of debt without any guarantee of employment.
Along the way, I found a major support network. I started seeing a therapist, which I highly recommend. I told close friends and family about my journey. I also started an Instagram account to track my progress and discovered the #debtfreecommunity, which is probably one of the most supportive online communities I’ve ever seen. If you want to follow my journey in more detail, come say hi to me there: @debtstoriches. If you’re thinking about starting down the path to being debt free, there’s no better place to hang out for motivation, commiseration, and major encouragement.
Now that I had a plan and a team around me, I was on my way to one of the toughest parts of this journey: facing your spending and attempting to change your habits!
Step #3: Track your spending. Not just monthly, but annually!
After almost a year of tracking my spending, I had a lot of data at my disposal! I knew that I’d spent exactly $3,555.51 on eating out over the year. I saw every clothing transaction leading up to the $3,069.37 balance. That’s not even including the $3,759.40 I spent on shopping or $2,241.52 on entertainment. When you’re tracking things monthly, the details can get lost. Lower months seem to make up for higher months, but averages expose every crack in your delusions.
Clearly I had a spending problem rather than an income problem, but I didn’t realize the extent to which I was wasting my money every single month. I mimicked the excuses I heard others making for why they couldn’t achieve their financial goals: I live in the most expensive city in the country. I have a long commute and I’m too exhausted to cook all of my meals at home. I work hard and I deserve to treat myself. I had to ditch those excuses and the poor decisions that they were masking.
Step #4: Face your demons and challenge yourself to decrease your expenses!
One of my first objectives was to tackle my problem categories. I didn’t have a cable bill or a Starbucks habit to cut, but I did have data. I knew I could save thousands of dollars if I spent less on a few main categories that were completely draining my funds every month.
One of the obvious areas for me to reform was my spending on meals out – drinks, lunches at work, takeout, restaurants. All of it added up to $3,551.51 – almost $300/month! Near the end of the year I’d already started cutting back by making the easiest changes first, and I continued to work my way through every area of spending in that category.
- Beverages: I’ve never been a coffee drinker, so this was one of the easier changes for me. I stopped buying drinks on the occasional morning before work. No mochas or London fogs or iced teas here. Instead I made tea when I got to the office.
- Breakfast: I’m not a morning person so I’m always rushed at the start of the day and I never eat breakfast unless it’s the weekend. It’s not easy to make good decisions on an empty stomach, so I’d find myself buying something on the way to work. Instead, I made sure I purchased fruit or muffins at first to have something fast and easy just to tide me over. If I was really on top of it, I made overnight oatmeal the day before.
- Lunches at work: I was also too disorganized to make a lunch the night before work. I gradually stopped eating lunch out during weekdays by keeping ingredients for simple meals like sandwiches or salads in the fridge at work. I continued to eat out for one meal a week at first, and then eventually I was able to stop altogether. Peanut butter and jam sandwiches were a lifeline during this transition period!
- Dinner: This category was one of the toughest for me, as I’m sure it is for many people. At the end of a work day and an hour on the bus, the last thing I want to do is prepare a healthy meal at home. I pass hundreds of fast food places and restaurants on my commute, a few of them regular haunts, so it was even more challenging to say no. I felt that curbing my routine of picking up takeout on the way home required drastic measures, so I challenged myself to completely stop in order to reset my habits. I tracked whether I had purchased a meal out in a given day, and each day that went by without spending was a tiny boost to my self-confidence. When December had passed and I’d only spent $2.60 on Costco fries because my spouse was craving them, I knew I was onto something. My only spending in January was $21.72 at a friend’s birthday dinner. With these two months under my belt I decided to go all out: 100 days without spending any money on meals out. Guess what? I did it, and it is so satisfying seeing three blank spaces in my spending charts from February to April!
Over the entire year, I’d gone from spending $3,551.51 on meals out to $596.66! It wasn’t easy, but now it’s the new normal and I can’t imagine eating out as often as I did before. I still enjoy the occasional dinner at a restaurant or a quick takeout meal, but it’s so much more special when it’s truly a treat and not a routine. You’d be surprised how much you can adjust to a new pattern of behaviour with a little time and patience.
Starting my first professional job and being more mindful of the ethics and sustainability of the clothing industry led to some major clothing purchases: $3,069.37 – over $250/month! I decided that the best way to tackle this would be to not buy clothing for an entire year.
I convinced myself that purchasing clothing was not an option, and I unsubscribed from all of the retailers through email and on social media. I even started varying my route home to break myself of the habit of stopping in to browse the stores. I fully embraced the art of the capsule wardrobe and ironically, I felt better dressed and more confident than I ever had when I was buying clothing regularly!
Near the end of the year, I accomplished my goal! I wrote more about my thoughts on the zero dollar clothing year, but ultimately it came down to loving and wearing what I already owned. At the end of this experiment, I did replace some essential items that I had worn out like underwear, bras, and tights. I also purchased a pair of black pants and a few shirts. In total I spent $901.55.
This was one of the categories that devastated me the most, because I had spent $3,759.40 and I couldn’t really give you a list of what I’d bought! It was hard to even write this section, knowing I spent over $300/month on things that clearly didn’t add enough value to my life for me to even remember them in detail. Generally, this money all went to things like cosmetics, books, board games, and complete randomness.
I didn’t have a defined strategy for spending less, but I did start to keep a wish list of items that I was interested in while I delayed the actual purchase. I’d review the list occasionally and delete things I no longer wanted, which reinforced the idea that I was making a significant number of impulse purchases.
Really, just looking at the total was excellent motivation to spend more intentionally the following year: $1,193.70, which is still a decent amount of shopping but much better than before.
Being in a new city, I definitely fell for the fear of missing out hard during my first year. With all of the food festivals and shows and concerts, I’d spent $2,241.52 or almost $200/month.
Sadly, there were quite a few things I wish I had missed out on! That tacky Oktoberfest with an insane cover charge and $10 beers & pretzels? Just thinking about it annoys me because we left after our first drink, refusing to waste any more money there.
We also went to the most pretentious picnic ever – Dîner en Blanc, where you buy tickets and then set up your own table and chairs and food to have dinner with hundreds of strangers all dressed in white. That one was actually a great experience, but definitely not enough to pay for it more than once!
Last year we focused on the events that we enjoyed the most, not hype or novelty. We saw the Vancouver Symphony Orchestra a few times, caught Cirque du Soleil, and had a couple of movie nights on half price Tuesdays. I went to see some of my favourite speakers – The Minimalists, Courtney Carver, and Jason Silva. I also attended a Millennial Money Meetup where I got to meet two of my favourite bloggers in person – Cait Flanders and Jessica Moorhouse. Starstruck!
Every one of those experiences was so memorable and absolutely worth the money: $823.31 for the year.
$750/month – $9,000/year!
I was amazed that being more intentional with my money could have such a huge impact in just one year. The $10-20 purchases of food or drinks or small items added the most excess to my spending, and they seemed so innocent at the time! Of course, these were just a few of my highest spending categories. Some of the other categories increased, particularly electronics when I purchased a laptop, phone, and Nintendo Switch all in one year. Not exactly recommended by any of the personal finance experts, but all things I love and use often!
All in all, I was able to decrease my spending from $36,000 to $29,000. That’s a difference of $7,000! My income also went up from $65,000 to $78,000, which allowed my to allocate even more money to debt repayment.
In total I was able to pay off $30,000 of my student loan debt last year – $34,311.07 including interest!
I would never have been able to achieve my goals if I hadn’t started tracking my spending and challenging myself to change my habits.
I’m also extremely grateful that I found a position after graduation that allows me to afford my student loan payments while enjoying my success too. Spending nine years in university and $130,000 was a major risk, one that doesn’t work out for many students. I’m one of the lucky ones, and I want to make the most of it.
Step #5: Forgive yourself and move forward.
I’m so proud of myself for exceeding the goals I set for the year. It feels like the weight of my debt is finally starting to lift and as the balance decreases I’m letting go of the shame and disappointment that came with it.
I’m also trying not to feel guilty when I spend money. There’s a difference between the pain that accompanies change and the unnecessary pain that we impose on ourselves when we’re just out for punishment. We can improve without enduring suffering as some skewed form of reparation for our poor decisions. Developing a positive relationship with money isn’t going to be about deprivation for me. I’m determined to find a balance between clearing past missteps, enjoying the present with intentionality, and securing a thriving future.
So what’s next for me? Well, I still have $89,200 of debt left to go! I’m hoping to pay off $40,000 this year, by doing largely the same things as I did last year: decrease expenses, increase income. It sounds simple, but it’s a lot harder in practice! At least I won’t be spending so much money on electronics again!
Well, December happened. I took two weeks off but ended up having to work from home for the first week. A seemingly brief time for family and friends followed and then I came down with a cold to cap off the year. Happy New Year, […]
In some ways, the most enjoyable moments of our life are when we haven’t started yet. We haven’t added up the debt we owe, we haven’t calculated how long it will take to pay it off, we haven’t started saving or investing. All we know […]
My former roommate and one of my best friends in university was the textbook example of an overachiever. She would study at all hours, survive on coffee and adrenaline, and exist only in a frazzled, constant state of imposter syndrome. At times I was so worried about her that I’d do her grocery shopping so she wouldn’t starve at her desk.
One night, we’d invited friends over to our dorm. She came out of her room, textbook in hand, and proceeded to continue studying while she ‘socialized’ with us. At that point, I had a bit of a moment. In front of everyone, I told her that she was pushing herself too hard, that she shouldn’t be there if she wasn’t going to be fully present, and that the additional effort she was putting in wouldn’t even show up on her transcripts.
It wasn’t my finest motivational speech, to say the least. I found out later that I’d made her cry, which was awful and something I still feel terrible about. I’ve never been the best at tactful communicating – I want nothing more than to see my friends succeed but sometimes my commentary comes out more judgemental than caring. I’m working on it. Fortunately, after my words had settled she did see the logic behind them. The extra hours of work she was putting in and the stress she carried to get 95-100% on exams and assignments were giving her diminishing returns. It doesn’t show on a transcript whether you received 91% or 100% – once you hit 90% it’s all the same grade: A+.
Fortunately, this story has a happy ending. My friend started to enjoy herself a bit more, still received stellar grades, won awards for her research, and went on to medical school where she tried (unsuccessfully) to encourage her new classmates to lighten up just a little.
90 Is Still An A
At some point I realized I’d fallen into the same trap of aiming for 100 when I really should have been aiming for 90. I’d read too many near-perfect expense reports from too many near-perfect spenders. You know the ones. Grocery bills less than someone else would spend on their pet food because they only eat oatmeal, lentils, and rice; one coffee in their meals out category but they’ll try harder to kick that vice next month; and zero other non-housing costs because walking and thinking are free. I admire these people, but I am not one of them and I never will be.
If you haven’t already guessed, I’m not naturally frugal. I’m frugal sometimes, in some categories, because I’m prioritizing other things, but I don’t naturally gravitate toward low spending. I’ve had to come to terms with the fact that that’s okay. Just like I don’t need to aim to earn billions because I’m not interested in a life of luxury, I also don’t need to aim for minimal spending because I’m not interested in retiring that early. I love my job (when I don’t hate it), I’m finally at a place in my life where I’m earning enough to enjoy my success while contributing to my financial goals, and I do value some things that cost money.
In my life, for my situation, retiring at some point in my early 40s is what I’m aiming for and what I would consider a 90 in my books. I’ve limited my lifestyle enough to reduce my career by 20 years. Sure, I could try to cut more and reach financial independence even earlier, but I’d be trading things I truly value for the next 10-15 years just to reach a milestone a few years earlier. The last 10% isn’t worth it to me, because it wouldn’t change the transcript.
I’ll always fall somewhere in between, and above average is not failing. I’ll still be able to leave mandatory work behind on my own terms if I buy new things and travel and go out to dinner occasionally. I’ll still be able to save 50% of my net income when many Canadians who earn much more than I do are saving less than 5%. It’s okay to delay a milestone for a few months or years if you have other goals that you want to tackle first. It’s all about prioritizing – 90 is still an A!
…Except When It’s Not
I couldn’t talk about financial goals without acknowledging that sometimes, 100 isn’t even an A. Sometimes you’re pushing yourself to the limit, doing everything that you can, and you’re still not making it. I used to earn $10,000 per year while I was in university, barely enough to cover my rent even with two roommates, and no amount of budgeting or reducing my grocery bill would have made that math work.
At the time, I had to choose between having more debt, not spending time with my spouse, or less relevant work experience for my future career. I chose having more debt, because I didn’t want to sacrifice my relationship or the higher probability of a solid job after graduation. Fortunately, it all worked out. My experience at part time jobs, my success in university, and a significant amount of luck landed me a great position within a few months – and my relationship stayed intact. If I didn’t get that first job, my life with six figures of debt could look very different right now!
As much as I despise my student loans, I’m also grateful that I was able to use debt to attain my goals without giving up other things that were more important to me. I’ve had my cell phone cut off, my credit card has been declined, I’ve lived out of the pantry because the month lasted longer than the money – but I’ve never been in a long-term place of financial insecurity. I’ve always known that if I was in a dire situation I could ask family for help, or move back in with my parents. Living in your childhood bedroom again is often seen as an undesirable last resort scenario, but it’s also a major luxury that I’ve tended to take for granted.
Money is not as easy as we sometimes make it seem. Part of being on a debt free journey or pursuing financial independence is trying to stay motivated. We tell ourselves it’s easy and that we can do it and that anyone can do it because we need to tell ourselves that to be able to keep going. The reality is that it’s hard, and it’s harder when you have less of a safety net, or no safety net at all. I hope that if you have space to breathe, you take it. I hope that if you don’t have space to breathe, you find it. If you can, remember that it’s okay to aim for 90.
November was a little slow compared to recent months, and I’ve been mentally preparing myself for that. After a major win in October when I paid off $4,800, it was tough to be back to normal – or slightly lower than normal. It’s all part […]
Facing a desperate situation – a six figure student loan debt with no six figure income – I did what many graduates do at first.. I ignored it. I decreased my spending enough to make slightly more than the minimum payments. In some months I […]
I’ve been looking forward to October for a few months, because some major funds were coming my way. I got a raise last year which was finally added to my salary so I had about a year of retroactive pay on my paycheque. Even after taxes, it was a nice chunk of change!
Although I didn’t pay all of this lump sum toward my debt, I was thrilled with the 85% I did pay. With the remainder, I bought a new cell phone. My old one wouldn’t turn on unless it was plugged into an outlet (even battery packs didn’t work), and I’m not about that landline life. As an experiment, I delayed purchasing a new phone for a week after mine became unusable. The word miserable comes to mind. I’ve always accepted my reliance on technology, but I didn’t realize the extent to which I depended on it to keep my spirits up. A week without on demand access to music, podcasts, the Instagram #debtfreecommunity, and my long distance friends was a major downer. It was an interesting experiment, but not one I’m eager to repeat! I plan to keep this phone for 3 years minimum, so I’ll be debt free with my six month emergency fund before I need another one.
Including interest, I’ve paid $5,120.30 to my debt this month!
This was a big month for me, being able to throw over $5,000 at my student debt. It was amazing to jump from under $100,000 to under $95,000 so quickly. I still have a long way to go, but it’s finally starting to feel real!
What’s up in November?
I’ll be under $60,000 on my student line of credit, and over $25,000 principal paid in 2017! I’ve also just purchased a laptop because I picked up a side hustle and I wanted to be able to work from home. I’ll be paying minimums on my debt ($1,100 in principal) in early November while I replenish my savings, but I should be back on track (and then some!) by the end of the month.