How we paid off a nearly Six-Figure debt in Five Years

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Oh yes – it’s finally time to go there. I’ve been slowly opening up by writing our Family & Finance series sponsored by Atlantic Credit Unions about the behind the scenes of our life – namely how we are paying for our home, planning for emergencies and how I’m learning to run a side hustle business. But it wasn’t always like this. I’ve been saying for a while that our journey has been a long one.

So today, I want to tell you how we actually got to be here.

First let me say that by no means am I an expert, perfect or do I have this all entirely figured out. But what I will say is that our journey from meaningless indebtedness to relative financial freedom has taught me some amazing and unexpected lessons that I now hold dear. I credit many of my current successes to skills I learned along this path.

To really tell this story, we have to hop into a time machine to early 2009 when Dan and I first met. I had just bought a small condo in the North End of the city – by myself with a bit of cash assistance from my parents. I had also just purchased a car and was carrying the last of a student loan from my Masters degree on a bank-held line of credit. I was working in radio at the time and anyone who knows that industry knows a) it’s not secure AT ALL and b) it pays a pittance. But even with all of that – I felt like I owned the world. I shopped my cares away. I deserved spa treatments and expensive hair cuts. Somehow, I just believed it would all be okay.

Wanna see a pic of us trying to cook dinner together in that tiny condo? Ya you do. LOOK at that dishwasher! That’s a 1989 special if I ever saw one ūüėČ

Teeny kitchen!

Meantime, Dan was just completing his second degree while working part-time in a record store (that’s where we met). At the time, he was carrying a significant student loan load – a combination of provincial and federal student loans, bank loans and even credit card loans. Within the first few months of dating, I remember him admitting he had a maxed out VISA card and I almost threw up. It all sort of hit me that I was falling in love with this man and we didn’t have two pennies to rub together between the two of us.

As I’m writing this, it occurs to me that I’m likely not alone in this experience. I know many of our friends have similar stories. We were in the age cohort that was just entering the job market¬†when the crash of 2008 happened. It sullied the initial workforce experience for lots of people and likely lead to some making career shifts. For others, like Dan and I, it forced us to just get down and dirty with the numbers, learn how to fix it and forge onward.

In the beginning, I remember feeling like I was drowning. We sat down and did one of those really basic spreadsheets with what we had coming in and what we owed going out and it was a massive reality check. Within six months of meeting, Dan moved into the tiny condo with me and we got real about paying down the debt and taking back our lives. In fact, it was in the midst of that chaos that I started blogging. Maybe I was looking for an outlet, I don’t know. But I’m glad I did.

By spring 2013 when¬†we bought the house we live in now, we had paid off nearly the entire debt – which when it was at its peak, totalled ¬†somewhere in the range of $92,000. ¬†Remember – our salaries were TINY, so this isn’t a story of some over paid couple sacrificing a club membership to pay off a Benz. We were regular 20-somethings, with low-to-mid-paying jobs and we just HUSTLED HARD.

Looking back, here are some of the decisions we made that helped us reach debt-free faster:

We snowballed our loan payments

I don’t know who came up with the term ‘snowball’ but it’s a great description of what we did. Once we knew how much we could toss at all our loans, we focused on ‘killing’ the smallest loan first. We paid the minimums on everything else, but threw every spare cent at the smallest one. Doing this, we paid Dan’s VISA off in a matter of months. Then we cut it up and moved onto the next smallest loan and so forth.

We went all cash

As convenient as debit and credit cards can be, we went all cash while we were paying down our loans. (We are now in the opposite situation, where we use our cards for almost everything now. I’ll post more about that another time.) I, of course, used old pickle and jam jars to allot each category ūüôā A few months ago, we were cleaning out our files and doing some basic upkeep and we came across one of our first ever cash budget spreadsheets. We gave ourselves $100/week to live on. ONE HUNDRED A WEEK. This was for food, gas and ‘entertainment’ and not things like heat, power, mortgage etc. Anything leftover we’d either carry into the next week or put into a jar for take out or a bottle of wine. Guys – we ate a lot of rice.

Any influx of funds went directly to debt

At the time, there were some fairly generous cash tax incentives for people who were educated in Nova Scotia and chose to stay here for work. We were lucky enough that Dan qualified for the full amount for three years running. I was also able to write off the interest on a couple of my loans and because our income was below a certain threshold, we got a few other tax breaks. ALL that tax money? Yep. Right onto our loans. This might have been the most significant move for us because over four years, the tax breaks totalled about $15,000 all told.

We still saved

Even if it was a pittance – we still saved what we could. Some months, all we could muster was $100 into a high-interest savings account. But that money came in handy when we had an emergency vet bill!! I also took full advantage of a generous stock matching program at my then-employer. In year one it was a 20% match on the dollar, in year two it was 33% and in year three, the match went up to 50%. Even though it meant my take home pay was less – I was essentially ‘paying myself first’ and then making money on that investment right away. In four years, I had enough in that stock account to fund the full down payment on our current home as well as all the associated moving fees.

We reassessed and reassessed more than once a month

This was a big one and I must admit, we have lapsed in this regard lately. We made sure to sit down and look at our budget regularly. Why? Because 9 times out of ten, when you write a budget, it’s what you¬†think you’re spending and not what you’re¬†really spending. Reassessing regularly allowed us to have the most realistic picture of what was coming in and going out each month.

We saved big time where it counted big time

Here’s where luck or fate or the universe was on our side. We found our current home on a whim. We didn’t think we’d be ready to move for another year – but we found the house during an open house and we had the money in my stock account for a down payment and we just jumped in head first. And as I’ve already explained, it was almost half the price of other homes we had been looking at.

The luck? It meant we listed our condo at the top of the market and sold it for EXACTLY enough profit that we were able to 100% pay off the last of the loans. We moved into this home with a very small car loan and a very, very reasonable mortgage – and that’s IT.

It’s really hard for me to remember what it was like back then. We didn’t have a baby. We didn’t have a giant dog who eats a boatload of food each day. We only had one car. We have certainly suffered ‘lifestyle inflation’ over the last four years. But the lessons have stuck. We went from being ‘debt payer-downers’ to ‘50% savers’ in order to make up for all that lost time. Sure, we have never been on a tropical vacation. We didn’t really have a honeymoon. Our wedding was local and we only invited 35 people.

But WE are in control. We dug ourselves into the debt. We dug ourselves out. And now? We are doing things our way.

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