Debt Payoff
Posted onHow 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 my monthly prescriptions, 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 $10 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.
Labels: debt
I think what you have done is great! I mean really great! So have you bought a car yet and if not what is your view on buying it? Will you buy new or used and will you pay cash? I make my gf crazy with how I manage and track our money, but when we retire we should have about 4 million , so its worth it. Part of that is putting money into a roth, $325, about equal to a car payment each month.
good luck, you're on the right track.
black dog: Thanks. :) Nope, I haven't bought a car yet (although I really really want to) ... but when I do, I'm probably going to buy new and drive it until it dies. If I don't buy new, I'll probably buy a newer model.
Right now, I won't buy a car until I have at least $10k for a down payment, and not until I have a mortgage. I don't want to jeopardize a potentially great mortgage rate just because I have a car loan on my credit report, ya know?
Also I think it's a great goal of yours to want to have such a huge nest egg when you and your GF retire. :) If I can have just a quarter of that by the time I retire I'll be happy! lol. :)
Way to go! my hubby and I are working on paying off over $50,000 worth of debt. We hope to pay it off by April 1st. Thanks for the motivation. I'll be back to read your blog for more tips.
Inspiring! Congratulations! Keep up the good work!
Isn't it frustrating when you know what you have to do to be debt-free or to save up or whatever it is that requires some sacrifice - and your friends don't get it? They think you are crazy or something. Glad you strode on inspite of all that!
you have an awesome and inspiring blog Krystal congrats and thanks for sharing.
Best Wishes Always,
Marenda
Congratulations, that is a really great story. I have 20k of student loans to pay off, but I put it at a lower priority than my other goals since it is such low interest.... but the joy of being debt free will be amazing!
You know, I've been reading your blog for so long, but I don't remember ever reading this. Great, inspiring story. I loved reading it.
Your blog is inspiring! And inspiration is exactly what I need right now. Every PF blog that I have read has minimal amount of debt compared to what I have (over $107,000 in student loans and $5,000 in credit card debt). So I completely understand that every little bit counts.
Thank you for sharing your experiences! Your blog is a great source of encouragement for me!
Thanks for your post krystal. A lot of people blog about getting out of debt, but I like that you've discussed also how you got into debt. This can serve as a warning to others who are reading this post. Great!
Yeah, I just wish I had come across this blog BEFORE I had got myself into debt! I will be following your story closely...
Thanks for the blog. My roommate was the one who gave me the link to your blog which helps me motivate myself to get out of debt. It is really great to hear people thinking the same way as I am. I am so desperate to get out of debt. My friends are all making fun of me for being so extreme. "I am still young and don't need to worry about debt because I am not going to retire anytime soon, so why bother!!" It is so refreshing to know that I am not the only person out there with friends who think that I am crazy for wanting to get out of debt.
Good for you for taking charge of your life! Your example will lead others to do the same just as you were once inspired. We've been in debt for years now and are slowly climbing out of it. With a mortgage and a child, it's been tough but we're making headway. Knowing there's a light at the end of the tunnel is the insurance we need to make it to the end.
Jerry
www.leads4insurance.com
Your story is inspiring! I hope to turn around my finances as well.
wow, your story is definetly something that I hope I can live up to. I'm currently still in school trying to save what little money I can make to get by, but if you can do it, I know I can.
this is really good, i should have met you earlier but i am going to start from this paycheck to put at least 5% of my paycheck into savings no matter how broke i am.Great job!!!!!!!!!!!!1
Congratulations! I just came across your blog on PPP and I think your debt success is great! As of today, I am debt free too. WOOT! What a great feeling! I would like to add you to my fave list on my blog. Keep up the great work!
~Tanya
Thanks so much for contributing through your blog. I am working through debt management right now and when others tell me I cant do it, I think of what you have done and it gives me hope. Your past situation and my current situation is very similiar and its nice to know I'm not the only one and there's hope...thanks and please keep writing.
BJR
I am so glad that I found your blog. You are a true inspiration. Thank you!
Hey Krystal:
Congrats on your success!I'm trying to follow good examples of money management especially since I'm a broke college student.I happened to run into this contest yesterday, http://indebted.mtvu.com/the-challenge/, might help me pay off some of my bills!
-Ashley
Your debt journey was really adventures & i want to tell you that i am debt free now.
But everyone should take some lesson from you in this recession period.
Congrats just go forward. I am sure there are several good things waiting for you.
Thanks for sharing this.
Krystal -
Thank you for sharing your story and congrats on being debt free!!
I can relate on so many levels as I am in the middle of paying off what seemed like an impossible amount of debt. I am now down to about $36,000 from about $65,000 in student loans (and I'm not even a doctor!).
I made a huge mistake going to private school and am working my way out of it now - thanks for your inspirational story!
Wow. You are a role model krystal. A good one to follow instead of those partying money wasting people. It is good to know that your sacrifices and your courage to face reality made you the way you are now, I hope I can follow your tracks. Though I am not on student loan, I have a scholarship to repay through cash or work. I wish I can apply your working principles. :D