Tag: financial independence

That Decade I Earned $0

That Decade I Earned $0

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 […]

Treat Yo Self

Treat Yo Self

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 […]

How I Paid Off $30,000 Of Debt Last Year

How I Paid Off $30,000 Of Debt Last Year

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.

Meals Out

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.

$250/month 

Clothing

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.

$175/month  

Shopping

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.

$200/month 

Entertainment

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.

$125/month

Total

$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!

The Worst That Could Happen

The Worst That Could Happen

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 […]

First Or Last

First Or Last

If you’ve seen the movie Talladega Nights starring Will Ferrell, you’ll remember that Ricky Bobby, #1 NASCAR driver, lived by the last thing his father, Reese Bobby, said before walking out on their family: “If you ain’t first, you’re last.” Years later, Ricky and Reese were […]

90 Is Still An A

90 Is Still An A

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.

My Heisenberg Moment

My Heisenberg Moment

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 Love My Job / I Hate My Job

I Love My Job / I Hate My Job

My emotions surrounding my career are all over the place. Sometimes, I’m proud of my accomplishments and excited for the future. Sometimes, I want to curl up in a ball under my desk and sob until I pass out. Sometimes, I swing between these two […]

Dynamic Timelines Of Financial Independence

Dynamic Timelines Of Financial Independence

Starting on the path to financial independence (FI) was hard. I had to come face to face with the consequences of my past decisions, including six figures of student loan debt. At the beginning, it was all overwhelming. When I first read about FI, I panic closed the browser and dismissed it as something that only debt free or wealthy or obsessively frugal people could achieve. I was stuck in the ‘must be nice’ mindset and I couldn’t open my mind enough to set aside my excuses.

Despite my best efforts to ignore it, the seed had been planted and it grew in the back of my mind over several months. When I revisited the concept of financial independence, I was still overwhelmed but ready to sit down and make sense of it all. I listened to hours of podcasts, read blogs from start to finish, and tested every early retirement calculator I could find.

After a few days, I started to understand the concept. After a few weeks, I started to understand the process. After a few months, I started to understand the math. By the end of 2016, I estimated that I would be debt free in 2023 and financially independent in 2047 (age 59). I had already cut 6 years off of my working life just from making minor changes, when I barely understood what I was doing.

In August 2017, I added a Find Freedom page to this blog, where I wrote an introductory note about finding financial independence and my progress so far.

I stumbled across the Financial Independence / Retire Early (FIRE) world in 2016, entirely by accident.

I had been making minimum payments on $130,400 of student loan debt and gaining no traction.

Searching for articles about debt repayment and spending reduction, I discovered the infamous pair of Mr. Money Mustache articles The Shockingly Simple Math Behind Early Retirement and News Flash: Your Debt Is An Emergency!!. Wakeup call is an understatement..

A year later, my spending is down, my principal payments are up, and my debt free date has shortened from 2026 to 2020.

As a complete – but welcome! – side effect, I’ve also projected that I can slash my working career in HALF from 40 years to 18 and quit my 9-5 by 2035 at age 47..

I’m still learning, and I fully expect my plans to change over the next two decades, but even if I fall short of this goal.. I’m still doing better than most of the population! Let’s figure this all out together!

Just three short months after this note, I’ve projected that I can be debt free by 2019 instead of 2020 and financially independent by 2031 (age 43) instead of 2035 (age 47). At this point I’ve cut my retirement age from 65 to 43 – that’s 22 more YEARS of financial freedom, just by being slightly more intentional with my money.

I fully expect my timeline to change over the years, and so should you. I feel fortunate that I wasted less than 6 months by keeping my blinders on. My one takeaway from my financial independence journey so far is that the worst thing you can do is let intimidation paralyze you. Even buying yourself one year of freedom is an amazing feat! You don’t have to retire with a million dollars by age 30 to benefit from financial independence. You’re also probably not going to reach FI at exactly the time you currently estimate – you may increase your income over time, or decrease your expenses, or earn more in investments. You may decide to leave your job earlier than full financial independence and lower your spending for a few years to bridge the gap.

For now, you don’t have to understand the concept or the process or the math. JUST START. Do one thing to improve your financial situation. Aim to spend slightly less this week than usual. Cancel one monthly subscription. Increase your retirement contributions by 1%. Trade one meal out per month to a meal you make at home. You don’t need to understand the big picture, and you don’t need to make drastic changes to reap the benefits. Sometimes you have to see this process start to work in your own life before you can crank up the intensity. You never know where it will take you, but for now just start.