You’ve heard all about the steps I’ve taken to keep myself in a perpetual debt-cycle for my entire adult life. If not, catch up here: 6 steps to how I paid off my $40,000 student loan, and still owe the entire balance.
I have committed to paying off my debt by June 2020– that’s 24 months from my first blog-post. I’ve knocked off $3337.10 since January, making my June 2018 starting point -$36,148.42 So, for the past 6-months I’ve been able to pay off an average of $556/month. To hit my goal, I need to increase my debt repayment to $1506/ month. Most people are likely thinking that this isn’t a big deal; $550/month is an average payment, and $1500 seems doable too. Most people would be right. I make debt payments in these amounts all of the time. The key for me will be to make a payment, and then not to spend the money again… something I’ve not been able to accomplish for 14 years.
I know that to improve my financial health, I need to do two things: spend less and make more money. It’s the same idea as getting physically healthy: eat less and exercise more. Simple, right? Ha. For me, I’m adding a few extra steps to increase my chances of success.
1: Build and maintain inspiration.
I, like many people, find tasks easier to accomplish when I’m well motivated and passionate about the subject matter. For personal fiance, I think the key will be to keep learning about the concept of financial independence. This means not only paying off my debt, but getting so financially savvy that I’m able to be debt-free, save money, invest, and retire early. You know what they say: go big or go home. So many other people are doing it. I know I can too.
I’ve been financially inspired in the past, believe it or not (after all, I was able to purchase my own home without help). There are several people, books and podcasts that have motivated me along the way. Right now, I’m a HUGE fan of Afford Anything Podcast with Paula Pant (she and J Money inspired me to start blogging) and I just found the #MoMoneyPodcast with Jessica Morehouse (a fellow Canadian and millennial).
I plan to dedicate a future blog to what got (and is keeping) me inspired to kill my debt and make the move from spender to investor. In the meantime, I would love to hear from you on any books, podcasts, articles etc. that I should check out! I’ve already read the Wealthy Barber, and several of Gail Vaz-Oxlade’s books (all highly recommended, especially if you are a personal finance newbie like me!). Please leave a comment below with your top picks and I’ll check them out!
2: Spend less.
There are a ton of things I can do to spend less. In one of the first Afford Anything podcasts that I listened to, Paula talked about the need to pay more attention to the steak instead of the peas… so many people focus on the small things, like taking your own coffee to work, getting the store-brand instead of name-brand, or cancelling your newspaper subscription. It’s true that these ‘peas’ add up, but they can take a long time to make a big difference. She recommended paying attention to the four biggest expenses in your life (the steak). I think these were housing, taxes, transportation and food (please correct me if I got it wrong!). Not all of these are currently money-suckers for me, so I’ve identified the 4 biggest areas of my life where I am wasting money and will start here:
- Downsize my living situation: technically, I already have this one in the bag and it was kinda by mistake. I moved out of my house last fall and by doing so slashed my housing costs in half. This has been part of why I’ve actually been able to pay off (and keep off) $600/month in debt. I’m not making any money on the rental, but the mortgage, insurance, taxes and condo fees are all covered, so it’s not costing me anything either.
- Dumping the interest payments: My debt is now just over $36,000 and all on credit cards, lines of credit and student loans with varying interest rates. Because I have good credit, I am sometimes offered balance transfers at 0% interest for a set period of time. I plan to take advantage of these so that more of my payment can go toward the principal.
- Ditching the ‘charge it’ mentality: From now on, I am on a cash-only budget. It is so much harder to overspend when you can’t put it on plastic. I know I won’t be getting cash-back rewards, but I will be saving more than I’d be getting in rewards anyway!
- No retail shopping, especially online: So, I have tried the no-credit card option before and it worked great- until I was online and saw something I just had to have. Enter Mr. Visa and Mrs. MasterCard to the rescue. I need to make this a rule if I’m going to be successful. This step is actually in-line with my desire to be more environmentally friendly anyway. There are plenty of great deals on lightly-used clothes, sporting equipment, furniture and housewares that I really don’t need to be spending a penny on new mass-produced stuff.
As a side-note, I’m not dissing the small-steps-to-cut-costs approach; I already bring my lunch to work and use my own mug when I purchase coffee (a savings of $0.50/cup!), so I’ll keep doing these things. I think they can help me stick to a budget, but I don’t think they are the sole answer to my -$36,000 problem.
3: Earn more.
I don’t have a stash of cash laying around or a windfall headed my way. I could sell my house, but I’ve owned it less than 4 years and the equity wouldn’t cover the entire debt (and I also think selling would be a bad financial move since I am now renting it out). So, I’ll need to find a way to bring more money in. My options here are to: make more money at what I’m currently doing; leave my current job for another higher paying job; or start a side-hustle. I like my current career most days, so I’ll keep it for now. I do think I’m due for a raise, so I will ask for one (stay tuned on how that goes). This alone won’t get me where I need to be, so I think a side-hustle is in the future. I have a few options to explore on this one. Looks like another blog post.
4: Stay accountable.
It’s funny how much cleaning you can accomplish in the 10-minutes before a visitor arrives. Lord forbid they see the dishes in the sink, unmade beds, or dirty laundry! This is where you come in. It will be much harder for me to splurge and procrastinate if I have to tell the internet world about it. So, that’s my plan. I’ll be blogging my progress on how I’m staying motivated, spending less and earning more. I hope you find some of the info useful (or at least entertaining). 😀
Until next time!