Road to Becoming Debt-Free
Debt is something that most people have. Nothing is free in life and items that are worth something come with some sort of a price tag. Aside from the purchases made in stores and online, most people spend a considerable amount to enrich their lives.
That being said, people can spend between $30,000 to $50,000 for a post-secondary education, which is often paid using a student loan, such as OSAP, which can take years and years to pay off. Next in the journey of life people may purchase a vehicle and finance it, by obtaining a car loan to purchase said vehicle. Then there are people who have saved enough for a down payment are able to afford a house by borrowing money from a bank or lender in some form of a mortgage. To top it all off, everything comes with crazy fees and monthly payments that have to be made plus any applicable interest, which doesn’t really help anyone get out of debt. Finally, we come to the silent killer of all savings, which is used in everyday life for groceries, clothes and impulse buys, the ever accumulating, all evil credit card. Sure a $10 purchase here and a $20 dollar purchase there don’t seem like much but that’s the thing about credit cards, in your head you just see the purchases for what they are at the time of purchase not realizing that all those small costs add up. It usually doesn’t hit you until you see your statement for a few hundred dollars, on top of what you already owe.
Credit card debt is one of the worst types of debt to have, due to the high interest rate that is charged, usually between 14% and 19% every time you have a balance owing on your card. Since I do not have a car loan or mortgage, I will be sharing my debt adventures revolving around education loans and credit card debt. I have to admit that I was one of those people who had ‘savings’ in my savings account, while I also incurred quite a lot of credit card debt. Although in hindsight, this method does not make sense, seeing a positive amount of funds in my savings account, helped me avoid the reality of the mountain of debt that lay in my credit card accounts.
After my transformation and turnaround attitude towards life a few months ago, I decided to sit down and write down everything I could do to live my best life from a financial lens. Fast forward to today, Saturday, February 21, 2015 and I can say that I have successfully paid off all my credit cards after many years of paying ridiculous amounts of interest and fees. Now that I have reached this point all I want to do is shred them into pieces and never look at them again. Next I am going to target paying my personal line of credit which I used to pay for my education. After that I will pay off the remainder of my OSAP student loan and will be able to cross them off my life list as well.
I knew that my limited income would not be enough to meet my financial needs, so as unglamorous as it is, I have recently started a second job. I am using that income solely to pay off my line of credit and I understand that any financial sacrifices I make now, will only help me in the future. The reason I chose to pay off my credit cards first is that I referred to finance guru Gail Vaz-Oxlade’s rules to paying off your debt and Luke Landes’ methodology to paying off your personal debt avalanche, which explained what types of debt should be paid off first and what steps you can take to help you assess your debt and create a plan of action. Paying off your debt or at least making the minimum payments is crucial, as this effects your credit score, which is relied upon when making bigger purchases such as a car and a house.
Tips to help you get out of debt:
Ending the Debt Cycle
With the many different technological applications available to us these days, I chose Mint to help me organize my finances and establish a reasonable and logical budget that would help me in paying all my personal debt, which consists of my student loans and my line of credit that I used to pay for my education.
Mint has proven to be an invaluable tool, kind of like my own personal finance police. It is available on your smartphone as well as your tablet or computer, it is very user-friendly and all you have to do is register and enter all your financial information. It reminds you of upcoming bill payments and tells you when you have exceeded a budgeted amount; you can also adjust the frequency of the emails and number of notifications to fit your needs.
I also used a smartphone app called Savings Made Simple, which is available on the Google Play Store. This app allows you to set ‘savings goals’, you simply enter what your saving for, the amount you want to save, the currency you are saving in and the deadline for your goal. Another unique feature that really allows you to ‘see’ how much you need to save is the goal payment breakdown function which shows how much you would need to save daily, weekly, bi-weekly and monthly to achieve your goal. You can even set reminders and automatic payments as well so you don’t have to enter a payment each time one is made, however, I feel a little rush when I can check off another payment made, so I don’t use this feature. Each payment that is made increases the percentage of the amount that is left until you reach your target goal.
Reminder: No matter how big or small, debt is a big burden. Whenever possible, be willing and open to making sacrifices so that you can pay off your debt and start living.
What methods have you used to pay down/off your debt? Please share what worked for you and what didn’t.
Stay strong and beautiful!